What does 'annualized' mean on a GDP release? Explain 2.2% growth in one quarter like you're telling a friend

The Bureau of Economic Analysis said US real GDP grew at an annual rate of 2.2% in the second quarter, revised up from 1.5% (full report). To a newcomer, that is confusing: the quarter lasted three months, so did the economy grow 2.2% in three months?

No. "Annualized" means the quarter's growth has been expressed as if the same pace were kept up for a whole year. A rate of 2.2% annualized corresponds to growth of roughly half a percent in the quarter itself. US and Canadian statistics agencies publish growth this way, while many other countries, such as Australia, publish the plain quarter-on-quarter change: Australia's economy grew 0.4% in the June quarter, which is a different convention and not directly comparable (GDP report).

The annualizing also exaggerates revisions. A revision from 1.5% to 2.2% sounds large, but in plain quarterly terms it is only about 0.2 of a percentage point. The GDP explained for forex traders guide covers quarterly, annualized and monthly growth.

We would like members to explain it in their own words:

• How would you explain "annualized" to a friend who has never read a GDP release?
• Is there a comparison, such as a car's speed shown in miles per hour although you only drove ten minutes, that helped it click?
• Which mix-up has caught you out when comparing growth between countries?
• Do you convert figures to a common basis before comparing, and how?

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