By Grant Hannis
Economics reporters can trip themselves up if they make elementary errors, undermining their credibility in the eyes of both their sources and their audience. Here are some of the common errors to avoid.
Failing to give time periods. Make clear the time periods you are discussing. You cannot simply report that imports have increased 10 percent. Has the increase been over the past year? The past five years? You need to report all the relevant facts, such as: “In the year to March, imports, measured in nominal values, increased 10 percent.”
Not specifying if figures are nominal or real. “Nominal” means the figures are expressed without adjustment for inflation. “Real” means the figures have been adjusted for inflation. Let’s say you are covering the latest release of real Gross Domestic Product (GDP) data, which show that real GDP rose 0.1 percent over the quarter. Your report needs to make it clear that you are talking about real GDP; if you just refer to GDP, readers will not know whether the economy actually has grown or whether the rise was just due to rising prices.
Saying inflation is measured by the CPI. It isn’t. Inflation is measured by percentage changes in the Consumer Price Index (CPI) over a specific period. Similarly, economic growth is not measured by GDP — it is measured by changes in real GDP over a specified time period.
Confusing the deficit with debt. The deficit is when the government is spending more than it receives in revenue, over a particular time period (such as a year). That is different from government debt, which is how much the government owes. When the government runs a deficit, this adds to its debt as the government must borrow money to meet the shortfall. To reduce debt, the government must start running surpluses, generating money it can use to pay off debt.
Confusing public and private debt. Governments run up debt, but so does the private sector when, for instance, companies borrow money. Just because the nation’s total debt is rising, don’t assume it is the government’s fault—it could be that the private sector is borrowing more.
Confusing percent and percentage point. A percentage point is the unit of measurement for the arithmetic difference between percentages. For example, an increase from 50 percent to 60 percent is an increase of 10 percentage points. But it is also an increase of 20 percent [(60-50)/50=20%]. Here’s a 20-minute tutorial on essential math for business journalists that includes this concept.
Grant Hannis has taught business and economics reporting at universities in the United States and New Zealand. He is head of the journalism program at Massey University in Wellington, New Zealand. His doctorate is in economics, and he spent 14 years as a senior financial journalist at Consumer magazine (the New Zealand equivalent of Consumer Reports).