“Severe but manageable fall”

Yesterday the data on the quarterly GDP came out. To be precise, these are the so-called "flash" estimates, the preliminary estimates which will then have to be confirmed on October 2 (it takes a long time to consolidate the figure). Our dear informant friends, as always courageously sided by the part of the established power, had an obvious interest in minimizing the disaster (to protect the historian Gualtieri) and therefore resorted to the usual expedient that now can only deceive the gonzo: that of taking as an implicit comparison the first published data ( here the best known and least successful attempt ).

This is the launch of the agency:

== GDP: Istat, in the second quarter -12.4%, at lows since 1995 =
(AGI) Rome, July 31 – The bill for the pandemic of
coronavirus on the economy. The GDP registered in the II
quarter the lowest since the first quarter of 1995 , period
of the beginning of the current time series: the drop was 12.4%
that is to say, compared to the first quarter, and 17.3% in
tendential terms that is compared to the second quarter of 2019. Lo
Istat announces.
In the first quarter, GDP had contracted 5.4%. (AGI) Pit
311001 JUL 20
NNNN ********
To read it this way, absent-mindedly, the quarterly flow of GDP would seem to have gone back 25 years: to 1995. In fact, it would already be an impressive figure, such as to promote various reflections. In order for these reflections to be fruitful, however, we need to put the data into perspective, which you have unfortunately only seen here in the entire panorama of Italian information (which is why you stopped here, and sent the others to where they deserved to go). I remind you of some examples: this , this , this , this , etc. All things that I would recommend you go back to, even if you have had the opportunity to reread them by those who copied them (obviously without citing the source).
There must be something on the ISTAT website that I don't understand. The historical series of quarterly GDP at chained prices of 2015, May 2020 edition (the most recent, and the one on which the data released yesterday) are grafted, in fact it seems to me to begin in 1995 (at least, you can select this date):
but by clicking on "View data" I can only see the values ​​since 1996:
A little bad.
Unlike other political colleagues, I have been dealing with macroeconomics since the mid-1980s. Among the presidents of ISTAT there were two of my professors and a roommate of mine at Sapienza. Among those who make these data materially there are my family friends, schoolmates, or students. The quarterly GDP figure was my daily bread decades before the economic crisis pushed you to deal with this stuff here. So I have the data, and I have had it since it exists (i.e. since 1970). I'll show them to you very shortly but first I would like to point out that flash estimates give a value of 356647 million (356.6 billion) euros for the second quarter of 2020 . In the first quarter of 1996 (the most remote that, for mysterious reasons, the ISTAT website allows me to view) the figure was 379.6 billion, that is, in the first quarter of 1996 we were better than 6.4%, or, if you want , in the second quarter of 2020 we are -6.1% below GDP in the first quarter of 1996.
And then I intervene to immediately remove the surprise (sorry): to find a quarter with a flow of GDP (i.e. income produced) around 356.6 billion, it is necessary to go back not to 1995, but to the second quarter of 1990:
You understand, is it true, that what has happened since the beginning of the year is something a little off the scale? And as for the "V shots", you can see that there are no precedents in this sense, also because, as is now clear to everyone, the so-called European aid will be accompanied by austerity measures, so the closest precedent, to what we can guess so far, is that of 2012-2019. To see it it doesn't look like a "V". It looks more like an "L", but maybe we don't have enough imagination.
As we have found here several times, a big problem for those who govern and for those who inform is having no idea of ​​the orders of magnitude of economic data. A two-digit change in a quarterly national accounts figure has never been seen. Point. Useless fanfalucare of "V", "U", "W" shots, and whoever has more has more.
However, always to get an idea of ​​the orders of magnitude, let's see what it would take for the annual GDP to drop by only 8%, as the Government insists on promising. In this table I show you the quarterly and annual profiles corresponding to the so-called "acquired" and the dreams of the Government:
The growth acquired is that which would occur if the quarterly GDP grew by 0% (i.e. remained constant) in the next two quarters (therefore remained at 356647 million in summer and autumn). In this case, the 2020 annual figure would be equal to 1476877 million, -14.27% lower than the 2019 figure, and this is the (de) growth acquired to date as reported by ISTAT.
To obtain a (de) annual growth of only -8%, on the other hand, assuming a uniform growth rate in the next two quarters, quarterly GDP should grow for two quarters in a row to 9.78%. By zooming out, you should see something like this:
The famous "V" (here in orange), which, as you understand by observing the data and their inertia, is simply not in the things!
Quite trivially, the third quarter of 2020 also includes the month of July 2020, and therefore also yesterday, when I went to lunch in a place that in the good old days was full, and of which yesterday I was the only customer . Do I really have to explain to you why there will be no "V"? Each of you has around you examples of closed rooms, workshops with the "rent" sign on them, gyms where courses are no longer held, empty theaters, etc. Of course, some activities have restarted: but no one will return to them what they have lost and to honor their debts with the state that has not helped them they have contracted debts with the banks. But above all the climate of terror fueled by the government that " contagion is not easy " (remember?) Pushes anyone who can make high precautionary savings. Even those who can do not spend. Because in this great confusion only one thing is truly clear: that this government, if ever further problems should arise, would not be in the least capable of protecting economically fragile families and businesses, also because it does not believe that this is its duty. Rather! This government considers itself invested by the sacred mission of purging the Italian slag economy.
And you are the slag: the professionals, the small entrepreneurs, the artisans, the restaurateurs, the artists, etc.
Other categories will be added: the protected / unprotected dialectic with a similar government loses relevance: nobody is safe from a similar mixture of subordination and amateurism.
Let's say that if there is luxury, but truly luxury, and from this quarter we grow to 5% for two quarters, the year will end at -11% (i.e. three points below what the Government insists on propagandising). But in order for us to grow like this from this quarter, we should not have empty premises and historic centers, we should not see closed shops, etc. So I don't think it will. Which, however, does not contradict the minister's well-known statement that the fall was serious (oh, if it was!), But manageable.
All true.
It would indeed have been manageable by anyone: but not by him.

Methodological note

A proper mention of how the data was reconstructed. The series currently available on the ISTAT website is the one in orange, which, in the terminal section, has been replaced with the latest data published in this pdf (those that certify the splash), shown in yellow. Before 1996 I used the 1996q3 release of the ISTAT quarterly income statements, which is the one shown in blue. Obviously those data are not directly comparable with the latest published data, for various reasons: the price base used to "enhance" the product has changed (in 1996 we used 1990 prices, in 2020 we used 2015 prices), they changed the national accounting criteria with the transition to the European System of Accounts 2010 , and there have been other minor revisions. However, when we intervene with similar revisions, we try as far as possible to preserve the dynamics of the historical series, that is, to avoid that after the revision years of good growth turn into years of dramatic recession. Let's say that the revisions of the national accounting systems are done to obtain more precise measures of the phenomena analyzed, not to rewrite history (or at least it shouldn't), and therefore growth rates are expected to be preserved, or in any case are not too altered, by revisions.
For this reason, from my earliest age at ISTAT they explained to me that yes, of course, the seventeen revision of the historical series was not directly comparable with the previous one, but if you wanted you could "retropolate" the second with the growth rates of the first and he would not have gone too far from the truth (which, however, does not exist in statistics, as I think you know). I set myself up to reconstruct the data from 1970q1 to 1995q4. It may also be that someone has done a more refined job at ISTAT, and maybe this is available online. If you find it, let me know. I don't think the meaning of the post will change much: maybe the years of delay are not 30, but only 27, or maybe 31. I would say that this is not very worth discussing. It would instead be useful to discuss how to get out of it, and if this cannot be done in a colonized country, it can be done in a free country

This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2020/08/caduta-grave-ma-gestibile.html on Sat, 01 Aug 2020 13:37:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.