The Economist - USA (2022-05-21)

68 Finance&economics TheEconomistMay21st 2022

Down in the dumps

Sources:OECD;GoldmanSachs

*High-frequencymeasureofeconomicgrowth for 50

countries,accountingfor90%ofworldGDP

104

102

100

98

96

052001 10 15 2220

Consumer confidence

Long-term average=00

Emerging markets

OECD

countries

40

20

0

-20

-40

-60

-80

2019 20 21 22

Current-activity indicator*

% change on previous month, annualised

China

World excl. China

Sachs, another bank, producesa “current­

activity  indicator”,  a  high­frequencymea­

sure of economic growth basedona com­

bination  of  surveys  and  officialdata(see

chart,  bottom  panel).  The  Russianecon­

omy  has  sharply  slowed  since Western

countries  slapped  on  sanctions in re­

sponse to the invasion of Ukraine.Andin

China, where the government’szero­covid

strategy has led to the strictestlockdowns

since early 2020, the economymaywellbe

shrinking (see next story). 

But most places are stronger.Adaptinga

weekly gdp series for 45 countries,includ­

ing India, Indonesia and the g7,produced

from  internet­search  data  by  NicolasWo­

loszko of the oecd, we estimatethatglobal

gdp growth has remained steadyinrecent

weeks. Overall, Goldman’s measureofeco­

nomic activity is lower than itwasin early

2021,  when  economies  reopened,butitis

still respectable. 

The data could yet shift—if Russiaturns

off  the  gas  taps  to  Europe,  Chinatightens

lockdown  restrictions  furtheror central

banks are forced to raise interestratesfast­

er than they currently expect. WhenAmer­

ica’s  labour  market  has  beenthistightin

the  past,  notes  JPMorgan,  a  recessionhas

tended to follow in “the mediumterm”.But

the  12th  global  recession  since 1900 does

not seem to have started just yet.n

China’seconomy

When bad data are good

W

henchinawaslockeddownduring

thefirstwaveofthepandemicinear­

ly2020,economicforecastershadtomake

two predictions: how much would the

economysuffer?And how muchofthis

sufferingwouldtheofficialstatisticsbeal­

lowedtoreflect?WhenChinareporteda

historic13.5%declineinindustrialproduc­

tioninJanuaryandFebruary2020,com­

paredwitha yearearlier,it surprisedmany

forecastersnotbecause itdivergedfrom

theirbleakviewoftheeconomy,butbe­

causeitchallengedtheircynicalviewof

thestatisticians.

NowthatChinaissquirmingunderits

most stringent lockdowns since early

2020,thesameconundrumhasreturned.

Howbadwilltheeconomyget?Andhow

faithfulwillthedatabe?Anearlyanswerto

bothquestionsarrivedthisweek.Thedata

wereworsethanexpected,andtherefore

worthierthanfeared.

OnMay16thChinareportedthatindus­

trialproductionfellby2.9%inAprilcom­

paredwitha yearearlier.Comparedwith

thepreviousmonth,itfellbyover7%,ac­

cordingtotheNationalBureauofStatis­

tics.Thenumberwasthemostconsequen­

tialsurprisesincethespringof2020,ac­

cordingtoa measurebyGoldmanSachs,

whichconsidersboththescaleofthefore­

casterrorandthesignificanceoftheindi­

cator. Retailsales fellby14% compared

witha yearearlier,onceadjustedforinfla­

tion.Cateringfellbymorethan22%and

carsalesbyover30%innominalterms.In

locked­downShanghai,salesofcarswere

“about zero”, according to theShanghai

AutomobileSalesAssociation.

Someofthemostspectaculardeclines

wereintheall­importantpropertysector.

Salesofnewhomesfellby42%andhous­

ingstartsbyover44%.EvenChina’sunem­

ploymentfigures,longmockedfor their

uncannystability,weremorbidlyinterest­

ing.In 2018 Chinarolledouta newunem­

ploymentsurveyinitscities.Thissuper­

sededanolder,spectacularlyuninforma­

tivemeasure,which countedthenumber

ofpeoplewhoqualifiedfor,andwereable

to claim, unemployment benefits. The

newsurveyshowedunemploymentrising

to6.1%inApril,stilla littlebelowitspeak

of6.2%inFebruary2020.Butin 31 bigcit­

ies,unemploymentisnow6.7%,whereas

it reachedonly5.7%in2020.Thissuggests

thatOmicron—orthepolicyresponseto

it—has hurtChina’s largercitiesdispro­

portionately.Thepatternofeconomic pain

isdifferentthistime.

It remainsto be seen whether  these

grimly realistic monthly indicators  will

translateintoa similarlyunflattering offi­

cial gdp figure for the second quarter.

Whenthepandemicfirststruck,China had

yettocommititselftoanofficialgrowth

targetfortheyear.That perhapsgave  it

moreleewaytoreporta bigdropin  first­

quartergdp. Thisyear,bycontrast,China’s

leadershavealreadyseta targetofaround

5.5%,andpromisedas recentlyas  April

29thtotrytomeettheireconomicgoals. 

It isjustnotclearhow.OnMay15th Chi­

na’sauthoritiessaidtheflooronmortgage

rateswouldbecut forfirst­timebuyers.

Butthatwillmakelittledifference  if  peo­

plecannotgoouttoviewproperties.  The

governmenthasalsoplacedgreatempha­

sisoninfrastructureinvestment.But  this

increasedbyonly4.3%innominal  terms

inApril,comparedwitha yearearlier—far

shortofthe18%pacethatNatixis,a bank,

thinksitneedstoreachifChinaisto grow

anywherenear5%thisyear.

Untiltheauthoritiesrelaxtheir  covid

controls,theireffortstorevivegrowth are

likelytobeineffective.Theymust  there­

forebehopingthatOmicronrecedes  fast

enoughtoallowgrowthtocatchup later in

the year. Alternatively, if China cannot

bringitselftoabandonitsgrowthtarget, it

mayhaveto fiddleitsgdpfigures.  That

wouldbea pity.ManyofChina’seconomic

indicatorsmaybeshrinkingdramatically.

Buttheircredibilityedgedupthisweek. n

H ONG KONG

Even China’s official economic figures look bleak 

The economy is going nowhere