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 officialdata(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
thefirstwaveofthepandemicinear
ly2020,economicforecastershadtomake
two predictions: how much would the
economysuffer?And how muchofthis
sufferingwouldtheofficialstatisticsbeal
lowedtoreflect?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
casterrorandthesignificanceoftheindi
cator. Retailsales fellby14% compared
witha yearearlier,onceadjustedforinfla
tion.Cateringfellbymorethan22%and
carsalesbyover30%innominalterms.In
lockeddownShanghai,salesofcarswere
“about zero”, according to theShanghai
AutomobileSalesAssociation.
Someofthemostspectaculardeclines
wereintheallimportantpropertysector.
Salesofnewhomesfellby42%andhous
ingstartsbyover44%.EvenChina’sunem
ploymentfigures,longmockedfor their
uncannystability,weremorbidlyinterest
ing.In 2018 Chinarolledouta newunem
ploymentsurveyinitscities.Thissuper
sededanolder,spectacularlyuninforma
tivemeasure,which countedthenumber
ofpeoplewhoqualifiedfor,andwereable
to claim, unemployment benefits. 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
isdifferentthistime.
It remainsto be seen whether these
grimly realistic monthly indicators will
translateintoa similarlyunflattering offi
cial gdp figure for the second quarter.
Whenthepandemicfirststruck,China had
yettocommititselftoanofficialgrowth
targetfortheyear.That perhapsgave it
moreleewaytoreporta bigdropin first
quartergdp. Thisyear,bycontrast,China’s
leadershavealreadyseta targetofaround
5.5%,andpromisedas recentlyas April
29thtotrytomeettheireconomicgoals.
It isjustnotclearhow.OnMay15th Chi
na’sauthoritiessaidtheflooronmortgage
rateswouldbecut forfirsttimebuyers.
Butthatwillmakelittledifference 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,theireffortstorevivegrowth are
likelytobeineffective.Theymust there
forebehopingthatOmicronrecedes fast
enoughtoallowgrowthtocatchup later in
the year. Alternatively, if China cannot
bringitselftoabandonitsgrowthtarget, it
mayhaveto fiddleitsgdpfigures. That
wouldbea pity.ManyofChina’seconomic
indicatorsmaybeshrinkingdramatically.
Buttheircredibilityedgedupthisweek. n
H ONG KONG
Even China’s official economic figures look bleak
The economy is going nowhere