Halloween is coming, and we just heard great economic news. We heard that the economy grew some huge number. Let’s party!
However, as you may already have been told, it is much too early to celebrate. We must be solemn.
For example, here are the first three results Google thinks I should see:
Well, at the risk of being censored for being too optimistic (and this is a very real risk, as I have in fact been censored for this very reason), I think the numbers are great! Instead of being cautioned and anxiety-ridden, we should be excited!!
In the US, our 2020Q3 GDP exceeded our GDP of 2018Q1. And, I remember 2018; it was great! We weren’t in some sort of apocalypse.
Yes, I know that we are not back to the high point, but we are much higher than I believed we would be when the pandemic broke out. I thought we were entering the great depression… but instead…. we entered 2018!
That’s all I wanted to say. The rest of the article explains how to calculate these numbers for yourself and explores some alternate numbers.
The European countries will disclose their GDP numbers over the upcoming days and I will update this article/table, as the numbers come in. I hope their numbers come in strong, but the people of Europe may have to wait another quarter to party like it is 2018.
Source of Data
All of my data came from the OECD. This is the same source I used for an article comparing economic and GDP data and COVID-19, but it now is updating with Q3 data. For convenience of data analysis, I downloaded the data by pressing the export button (seen in the image below.)
I pulled the data into Excel and put it into a Pivot Table. It is a big file with a lot of data. I filtered it to only show the same metrics that the OECD chose to highlight. This data is the gross domestic product, using US dollars (all countries are stated as US dollars), fixed purchasing power parity, OECD reference year (to remove effects of inflation), and seasonally adjusted.
By selecting countries, my pivot now shows the GDP of the US and the five largest Western European economies:
So, I created a new table dividing each country’s GDP per quarter by its 2018-Q1 GDP to see how well each country has done compared to 2018-Q1.
While the above chart reflects the most common way to look at GDP, I personally think it is more interesting to evaluate GDP per capita.
So, using the data already found in the download from OECD, I changed my pivot to show people per country (the values are seasonally adjusted per the OECD).
Then I divided gross GDP by population to get GDP per capita:
Note: people often think there is a mistake in the data because the US GDP per capita is so much higher than that of Europe. There is no mistake. This website has a nice chart which I post below showing the comparison over time.
Now, you may be wondering where I am going with all of this: I want to compare if the “average person” is better off now than he/she was in the past.
You can do this by dividing the GDP per capita from 2018Q1 by each subsequent quarter’s GDP per capita.
The US per capita GDP in 2020Q3 is still slightly lower than in 2018Q1, so we too may need to wait until next quarter to party like it is 2018.