You will be able to find the actual number and its context behind an economic headline.
On the same morning, Grace saw two headlines about the same GDP release. One said the economy grew about 4%. The other said growth slowed to 2%. She assumed one of them had made a mistake. Neither had. They were reporting two different comparisons from the same table, and neither headline said which one it was using.
Economic headlines are short by necessity, and to fit a number into a few words they drop the context you need to read it. This lesson shows you what usually goes missing and how to get it back.
Most economic headlines report how fast something is changing. "Inflation eases", "growth slows", "unemployment edges up". What they rarely tell you is the level: how high prices actually are, how big the economy is, how many people are out of work.
That gap causes the most common misreading, which you met in lesson 3.1, What the consumer price index measures and who publishes it. "Inflation slows to 2%" means prices are still rising, at 2% a year instead of a faster rate. They have not fallen. A grocery bill that rose 5% last year and 2% this year is 7.1% higher than two years ago.
The same goes for other figures. "Growth slows" means the economy is still growing, just more slowly. "Unemployment rises slightly" may describe a rate that is still low by past standards. Before reacting to the word in the headline, find the number it describes and ask what level it sits at.
The second thing headlines leave out is the comparison. Economic figures are compared over different periods, and the choice changes the number a lot.
Year-on-year compares this month or quarter with the same one a year earlier. It smooths out seasonal swings and is what most inflation headlines use.
Month-on-month compares this month with last month. It picks up turns early, but it is noisy and affected by seasons and one-off events.
Quarter-on-quarter compares this quarter with the previous one. For GDP, it is often reported as an annualised rate: the growth over one quarter, scaled up to show what it would be if that pace continued for a full year.
Annualising makes small numbers look big. Here is an example with made-up figures. The economy grows 1% from one quarter to the next. Compounded over four quarters, that pace would give about 4.1% over a year, so the annualised figure is about 4%. Meanwhile, compared with the same quarter last year, the economy might have grown only 2%. That is how Grace saw "grew about 4%" and "slowed to 2%" on the same day. A fall of half a percent in one quarter annualises to about minus 2%, which can produce an alarming headline from a small move.
So when you see a growth figure, find out which comparison it uses before you compare it with anything else.
Many economic figures are released early and revised later. In lesson 4.2, Indicators to watch: GDP, hiring, inflation and the yield curve, you saw that the Ministry of Trade and Industry publishes an advance estimate of GDP soon after each quarter ends, based on incomplete data, and updates it as more data arrives. Labour market figures can also be revised.
Revisions are often small, but not always. A quarter first reported as slight growth can be revised into a slight fall, which can change whether the economy met the rule of thumb for a technical recession. Headlines rarely report the revision with the same prominence as the first figure.
So treat a first estimate as a first estimate. If a decision depends on it, wait for the next release.
The fix for all of this is to read the original release. It is usually short, and it is free. In Singapore, the main sources are MAS for monetary policy statements, SORA and core inflation, the Ministry of Trade and Industry for GDP, the Department of Statistics for the CPI and other official statistics, and the Ministry of Manpower for jobs, unemployment and retrenchments. Each publishes on its own website, usually with a short summary at the top, the full tables below, and notes that explain which comparisons are used.
The release will give you the level as well as the change, say which period is being compared, mark whether a figure is an estimate, and often show the categories behind the headline. Five minutes with it tells you more than any number of summaries.
Grace now does this for any headline that makes her want to change something in the family's finances. This week's news will have at least one economic headline in it. Pick one that caught your eye, and go and find the release behind it.
Take one economic headline from this week, find the original release, and write what the headline left out.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).