Quite obviously, not many people take China’s own statistics at face value.
Also quite obviously, China is a hard economy to accurately measure anyway. It’s really quite big and its pace of change has made grasping any bit of it for very long more than difficult. Read more
UK chancellor George Osborne has announced new budgetary rules that aim to eliminate the current structural deficit within three years and ensure public sector net debt is falling as a share of national income by 2016-17.
Key to the new vision is a budget surplus by 2017-18.
But as the FT’s Martin Wolf warns on Friday:
…the focus on public debt alone is mistaken. Crucially, it ignores the asset side of the balance sheet altogether. Moreover, other things being equal, the bigger the fiscal surplus, the lower interest rates would be. If that encouraged a run-up of private debt, the economy might end up yet more unstable. Alas, the Office for Budget Responsibility already forecasts a big jump in household debt.
Have a chart Credit Suisse’s Neelkanth Mishra put out back in 2013, the same Neelkanth Mishra who has been arguing persuasively that if “activity in informal industries and rural areas were properly measured, India’s GDP would look bigger and more stable”:
Standard deviation of reported quarterly GDP growth of India is second lowest only to China, you say? Read more
Apple just reported the biggest quarter of net income earned by any public company ever, at least in nominal terms. It remains the world’s most valuable publicly traded company by a large margin. So naturally there are people who want to put these statistics into perspective by comparing a corporation to a country. Unfortunately, most of those efforts miss the mark because they generally don’t compare apples to apples.
The most common way to measure the size of an economy is to look at how much stuff is produced in it each year. (This is GDP.) You might think that is equivalent to corporate revenues, except that a lot of those inflows are offset by outflows to suppliers. In other words, you’d be looking at a company’s GDP without subtracting the imports that represent foreign production. That’s double counting. Read more
What you think of the new one will probably depend on what you thought of the old one. For many people “not much” seems inadequate.
From Capital Economics’ Mark Williams on the likely Tuesday announcement of an upward boost of up to 10 per cent to the Chinese government’s estimate of the size of its economy (our emphasis): Read more
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