We had feared that one of most famous of Chinese statistical quirks might have abandoned us forever.
The reported combined GDP of China’s provinces came in only slightly above its national GDP in the first quarter, amid reports that more than 70 smaller Chinese cities were dropping GDP as a performance metric.
Perhaps as China stopped evaluating its local government officials on a narrow GDP basis, the officials would stop doing the obvious and fiddling their GDP numbers.
That would in turn stop the sum of China’s regional GDPs always coming in ahead of the national figure… as well as helping with things like unequal income distribution, problems with the social welfare system and environmental costs. Read more
Germany shrank, and France stagnated in the second quarter. Italy we’ve all agreed not to talk about until Matteo Renzi waves his magic liberalisation wand, right? Here’s the FT:
The data from the currency bloc’s two largest economies came as the embattled French government said the disappointing growth meant it would miss its budget deficit this year and halved its gross domestic product forecast for 2014.
Germany’s economy, which provides more than a quarter of the euro area’s output, shrank 0.2 per cent between April and June, according to official figures. The French economy recorded zero growth during the period.
The current level of income inequality in the U.S. is dampening GDP growth.
At least, that’s the conclusion of a new report from S&P Capital IQ. There’s a lot to digest in this exhaustive summary of existing research, including a bunch of interesting data on educational attainment and research on political frictions in times of extreme inequality. But the core argument is driven by a simple relationship: while many people tend to spend most of their earnings (and often more than they actually earn) on goods and services, those who make a lot of money spend a large share of their income on financial assets and property. As more and more of the country’s income shifts upwards to a smaller subset of the population, everyone else is deprived of spending power at the same time as more capital is available to invest. Read more
Let’s peer into the nearish future for the world economy.
Here’s a refreshingly different view on China, courtesy of Karen Ward, senior global economist at HSBC.
Her key point: it’s not that China is necessarily over-investing (as is frequently argued) but that the rest of EM may be under investing. Read more
There’s an interesting debate going on between Steve Randy Waldman, Karl Smith, Scott Sumner, Evan Soltas, Mark Sadkowski (and more).
It started when Waldman proposed a simple but elegant argument that the 1970s great inflation period may have driven not so much by expansionary monetary policy but rather population demographics: namely the baby boom and the entrance of female workers into the economy. Read more
This is what $560bn or so of newly-discovered US economic output looks like.
Yes it’s the latest BEA estimates/revisions of US GDP.
They’re out – and with 1.7 per cent growth in 2013′s second quarter, and 2012 growth revised up to 2.8 per cent from 2.2 per cent at the last estimate, they’re fairly good. Read more
Deutsche Banks’ China economics analysts are pondering why their forecast for 8.5 per cent growth next year is well above consensus (and even well above the IMF’s 7.7 per cent and the World Bank’s 8 per cent).
They have come up with a list of reasons why everyone else might be overlooking some positive possibilities for future economic growth. We’re not sure if we agree, but bear with us (haha) anyway. Read more
Stephen Roach recently wrote for Yale Global Online arguing that yes, rebalancing is happening, but the new leadership have it under control because they are enacting the necessary reforms to facilitate this transition.
A quick look at the composition of second quarter growth statistics suggests that is not happening — at least not now. Read more
It’s clear to everyone that something big is happening in China.
Double-digit growth is long forgotten and even high single-digit growth is above the consensus (for whatever that’s worth). The implications of this alone are quite massive and you could throw around any number of predictions about what it might mean for commodities, global imbalances, and more. Nomura sees a 30 per cent chance of growth falling below 7 per cent later this year, and Barclays are talking about the odds of growth slowing to as little as 3 per cent growth. Even entertaining the possibility of an outright economic contraction would not get you accused of being a crazed permabear these days. Read more
Kate’s already noted some of the oddities in China’s latest GDP data.
But it’s worth re-emphasising the ongoing contribution of investment to the figures. Read more
A few thoughts on China’s second-quarter GDP, which came in at 7.5 per cent, in line with expectations:
- The seasonally-adjusted rate is 1.7 per cent. If annualised — ie the way that most countries present their quarterly GDP data — is it just under 7 per cent. Read more
Well, not a problem apart from all that confusion that arises when a senior Chinese official apparently contradicts official GDP targets and expectations…
Chinese Finance Minister Lou Jiwei said a 6.5 percent economic-growth rate wouldn’t be a “big problem,” signaling the government may tolerate a slower pace of expansion than officials have previously indicated.
That’s from Bloomberg, and Lou made the comments at a press conference in Washington, so he knew it would be picked up by the western media. Xinhua also has a report that paraphrases Lou as saying he expects 7 per cent growth this year. (The official target, remember, is 7.5 per cent). Read more
That’s from Bloomberg Briefs’ Michael McDonough (and yes, he does allow his Twitpic charts to be republished, provided attribution is correct). Read more
Kevin Rudd 2.0 has been quick to highlight the dangers posed by slowing Chinese growth since he was returned as Australia’s prime minister.
For example: Read more
Another day, another Aussie GDP downgrade.
From BofA Merrill Lynch: Read more
A pretty interesting paper, and conclusion, from the Bank of England’s External MPC unit on Friday — or at least one that should keep the debate going over the art/science of GDP revisions… Read more
That’s recession and the merest hint of the word sends Australian policymakers in to paroxysms of anger.
For example, here’s David Gruen (the Treasury’s chief macroeconomist) speaking before a Senate hearing last week.
From the Sydney Morning Herald: Read more
This is is a guest post from Philip Pilkington, a writer and research assistant at Kingston University.
After a few days of volatility the S&P 500 rebounded on the back of better than expected jobs data last Friday. Meanwhile the Nikkei, the decline of which the previous week seems to have precipitated the shakiness in the S&P 500, started to stabilize on Monday. And so the classic question rears its head once more: do stock markets drive the economy or vice versa? Read more
The pain goes on for the currency dubbed until recently the southern Swiss Franc…
A couple of years ago, we did a long Q&A with Fed staff economist Jeremy Nalewaik about his work on the differences between Gross Domestic Product and Gross Domestic Income.
The two indicators, as you would expect given their theoretical sameness, tend to be nearly identical over a long enough stretch of time. GDI is interesting mainly because Nalewaik had found that its early estimates tend to be revised less over time than are initial estimates of GDP. Read more
We are, of course, talking about iron ore which has slipped into bear market territory overnight (defined here as 20 per cent fall from a recent high).
It turns out that China’s official statisticians might not have adjusted for 2012 being a leap year in the Q1 accounts. Plus, there have been big sampling changes that render the numbers even more subjective than we thought… Read more
A great pick-up from Climateer Investing on the extremely important subject of whether we are collectively, as a planet, mismeasuring GDP by failing to account for the transformation of the economy into a service-oriented, information-based, digital entity.
It comes from Irving Wladawsky-Berger, the former IBM executive.
As he notes:
Gross domestic product (GDP) is the basic measure of a country’s overall economic output based on the market value of all the goods and services the country produces. Most measures of economic performance used by government officials to inform their policies and decisions are based on GDP figures. But, many concerns have been raised about the adequacy of GDP-based measurements given the major structural changes that economies around the world have been going through over the past few decades. GDP is essentially a measure of production. While suitable when economies were dominated by the production of physical goods, GDP does not adequately capture the growing share of services and the production of increasingly complex solutions that characterize advanced economies. Nor does it reflect important economic activity beyond production, such as income, consumption and living standards.
ROBOTS! AUTOMATONS! CYBORGS! ARTIFICIAL INTELLIGENCE! ARGHH!!!
Last weekend I attended Robots on Tour, a robotics, humanoids and cyborg exhibition put together by the Zurich-based Artificial Intelligence Laboratory at the University of Zurich. Read more
We’ve read two very interesting and distinct pieces of analysis today that raise quite dramatic questions about China’s GDP data. Yes, we know you probably weren’t too credulous to begin with, but the details of both are interesting. Read more
Hugh Small is an independent economic analyst and management consultant, who was formerly with US-based firms Arthur D. Little and A. T. Kearney. He blogs at mature economy.org, and has a running thesis that mature economies must be assessed differently to developing economies because they share very different strategic goals.
Furthermore, once you factor in the subtle differences that apply to developed economies, things like the UK productivity puzzle begin to look a little less mysterious. Read more
The preliminary UK GDP estimate for the fourth quarter is out and it looks like there’s been a return to err.. contraction.
Via the ONS:
GDP was estimated to have decreased by 0.3% in Q4 2012 compared with Q3 2012. Output of the production industries was estimated to have decreased by 1.8% in Q4 2012 compared with Q3 2012, following an increase of 0.7% between Q2 2012 and Q3 2012.
Friday’s announcement of new daily liquidity operations by the Peoples’ Bank of China has prompted a lot of speculation about what it means for monetary policy in China. The PBoC has historically set rates via tools such as reserve requirement ratios, and prescribing loan and deposit interest rates.*
Societe Generale’s economists believe this is a step towards interest rate liberalisation, and that the PBoC will increasingly use its liquidity operations and repo rates to guide policy rates, rather than prescribed RRR and deposit and lending rates. Read more