China’s economic growth in doubt again [Updated]

updated here postal. Official Chinese statistics show growth of 6.3% year-on-year in the second quarter. Maybe less?

this FRBSF China Periodic Activity Tracking System (China CAT) of Fernard, Hsu and Spiegel (United International Monetary Fund2020) Indicating a slower rate of growth than reported by the Office for National Statistics:

figure 1: China’s official GDP growth, normalized and detrended (blue), CCAT (green) and imports (tan), expressed in standard deviation units. ECRI defines the peak-to-trough dates of recessions in gray. source: China CAT (August 2023 edition)ECRI.

Note that CCAT’s Q2 observations are different than usual, as the consumer series is only available until April. Why the release of consumption data was delayed is a mystery (although periodic delays are not entirely unexpected).

The authors conclude:

The standard deviation of growth in China’s cyclical economic activity from trend over the past four quarters ending in Q2 2023 is -0.51.

In a previous version of this article, I used ad hoc regression to convert CCAT readings (expressed in standard deviation units) to GDP growth, resulting in an implied growth rate of 5.3%. Author of SF Fed China CAT (john fernard, mark mirror and their team) were kind enough to provide me with a methodologically consistent translation of their Chinese CAT readings to GDP. These results are shown in Figure 2.

figure 2: China GDP YoY growth (blue), and growth implied by China CAT (red), IMF WEO July forecast (sky blue squares). ECRI defines the peak-to-trough dates of recessions in gray. Source: National Bureau of Statistics, personal communications, IMF World Economic Outlook July UpdateECRI and authors’ calculations.

The GDP growth rate implied by CCAT in Q2 is 3.9% instead of 6.3%. The intuition for translation is as follows:

Our estimated GDP trend is about 5.1% (last tab) CCAT Spreadsheet), which is based on a dual-weight filter with a bandwidth of 24 quarters. (Estimated trend for 2019 is about 6%). The standard deviation of detrended GDP for the entire sample is about 2.4%. Thus, if the growth rate is 0.51 standard deviations below trend, this equates to a growth rate of around 3.9%.

Such low numbers will only intensify fears of the release July trade dataalso Deflationary annual rate in CPI.