General Question

luigirovatti's avatar

Why is the economy improving in my country, while inflation goes up?

Asked by luigirovatti (2820points) February 3rd, 2022

I’m talking about raw materials, not just gas & electricity bills. The economy however, in Italy, according to ISTAT, is almost at pre-COVID levels. Somebody can explain that? Because many businesses are closing, so the rise of economy doesn’t come from that.

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15 Answers

kritiper's avatar

The economy depends on the amount of buying and selling of products and services. It doesn’t have anything to do with the cost of those products and services.

Response moderated
Zaku's avatar

What statistic, specifically, are you referring to as “the economy”?

luigirovatti's avatar

@Zaku. Here, I thought posting an article in Italian wouldn’t help if you don’t know the language, but, as you insisted…:

Zaku's avatar

Va bene, ma l’articolo anche` sembra simplicmente scrivere “L’economia italiana รจ cresciuta” . . . immagino che probabilmente vuol dire la stessa cosa che intende in Inglese.

The thing is, in English too, economist use the term “the economy” in a way that seems to me like propaganda vocabulary, and always with the idea that whatever that means, it’s “good” for everyone, but your question shows one way in which that’s certainly not always true. The financial situation for many did not grow.

For example, here is a whole article about “the economy” “growing” which starts out insisting that’s good and that everyone should want it, but then waltzes through various metaphors, never defining what it means.

Is it the same thing they mean when by “gross domestic product”?

Whatever they mean, it seems very clear that only some people are actually benefiting from the GDP, or “the economy”, and that most of the benefit is to very rich people and corporations.

In any case, here is an article which does seem to indicate in passing immediately that GDP is what is meant by economic growth, and goes on to discuss the relationship between that and inflation, at least according to its perspective. I expect this answers the question here.

flutherother's avatar

The economy is probably bouncing back from very low levels during the Covid shutdowns.

luigirovatti's avatar

@flutherother: I still don’t understand (it’s a bit complicated the article from @Zaku) how from the GDP falling low, it automatically bounces back high.

RedDeerGuy1's avatar

My guess is that people saved money during Covid and have pent up desires for goods and services.

SnipSnip's avatar

It is a false sense of improvement…beware.

HP's avatar

Seems to me there’s a pervading atmosphere of impending reckoning. And for the first time in my long life I feel it to be universal.

flutherother's avatar

@luigirovatti Consumer spending is one of the factors when calculating GDP. During lockdowns people weren’t spending as much on holidays, eating out etc so GDP was temporarily lowered.

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luigirovatti's avatar

I asked the question on Reddit and RoastedRhino (credits go to him) answered me. Here’s the text:

Just to make sure we are talking about the same thing, what is the highest in Europe and in recent history is the yearly increase of GDP, not the yearly GDP.

Given that the Italian GDP has grown less than the rest of Europe for a while and took a dive with COVID, a large increase is not impressive. On a worldwide level, countries with low per capita GDP tend to show higher variance in their GDP increase.

In short, it is not clear how much of the Italian GDP increase is due to structural reform or just contingent recovery from a very bad year with repeated lockdowns.

Ikara's avatar

When statistics talk about economy, they are not talking about small businesses, the cost of living, fair wages, or whether or not the average person can afford food, gas, and rent. That is not economy.
Economy is whether or not product and money is moving. Economy has nothing to do with whether or not the cost of apples has gone up or down. Economy is whether or not people are buying apples.

HP's avatar

The new reality finds the world turned on its head. I can’t speak for Italy, but here in the states we are confronted with a truly dystopian reality where the economy supposedly is booming, yet the people themselves fall ever further behind. Corporate profits are at all time highs as the stock markets roar, while homeless settlements accumulate like refugee camps, the roads and bridges crumble and the opioid epidemic competes with covid to enhance the lucrative and booming funeral business. Tumbleweeds blow down the derelict streets of our former storybook towns and villages, while people can no longer afford the rent or mortgages in the cities now distinguished for crumbling abandoned factories and squalid tents infesting the sidewalks up and down main street. I used to think myself a cheerful person and actually look forward to the future. Those were the days.

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