Tags: china | fed | economy | investors

Stop Being so Harsh on China, US Doesn't Release Truthful Data Either

Stop Being so Harsh on China, US Doesn't Release Truthful Data Either
(Dollar Photo Club)

Friday, 15 April 2016 11:38 AM Current | Bio | Archive

China’s GDP growth data remained steady at 6.7 percent in the first quarter.

Many criticize Chinese data as not representing what’s actually going on in the real economy. I think this is unfair, notwithstanding admitting China’s growth data may not represent economic reality, but then nor does U.S. growth data, nor indeed European growth data.

The extent to which growth numbers are being revised nowadays is a huge issue.

Growth in China remains credit-fueled, at least in part.

New lending accelerated in March hereby boosting liquidity, which could reduce the need for further monetary easing somewhat while fiscal policy should do more of the work.

Nevertheless, attempts to reform the economy and perhaps create a more long-term stable structure appear to have been superseded by a desire for short-term growth in a rather more top-down command-economy type way.
Longer term, several economist are now starting to worry quite seriously about the trend of the Chinese economy, which is important for long-term investors who have China on their buy-list.

Near term, meaning the next couple of years, this sort of pace of growth, which is certainly above China’s trend growth, can probably be maintained, which could be of interest for speculators, but not, as said here before, for long-term investors.

The structure of China’s growth did show strong construction activity, credit fueled though it may be. Construction starts rose 19.2 percent year-on-year. Housing sales rose 60.3 percent in Q1, but completed homes that remained unsold rose to 7.4 percent in square-meter terms in Q1.

Of course, all this has a read-through into countries like Australia, as the construction sector is commodity intensive.

Already, the Australian dollar hit a 9-month high against the U.S. dollar.

All that said it’s also a fact recent Chinese economic activity has been more geared toward service sector spending, which has less of an impact on the rest of the world.

In the U.S. we’ll have industrial production data today, which theoretically is a volume figure and therefore a real figure.

The revival of manufacturing sentiment data therefore needs to be treated with some care as a lead-indicator for today’s numbers.

Sentiment data is also, in theory, a real figure, but it often turns out to be a nominal figure.

As an investor one should always try to put the data in context of the “real” world, which is easier said than done, and not getting mislead by “nominal” fantasies.

While industrial production should grow, a straight extrapolation from what we call sentiment indicators is for long-term investors not advisable.

We will also have the Empire State survey of U.S. regional manufacturing sentiment.

Elsewhere in the world there a couple geopolitical events that are interesting:

  • In Brazil we’ll have on Sunday the next vote in the attempt to impeach the President Mrs. Dilma Rousseff that will take place in the Brazilian Lower House of Parliament. Political commentators suggest the vote is too close to call.

For long-term investors that are interested in Brazil, I think, it is still too early to step in as risk still largely outpace benefits. For risk takers it’s certainly an interesting place.

  • In the U.K., the EU referendum campaign starts formally today, which means the rules governing discussion the referendum also come into place.

By the way, and for investors it could be of interest taking notice we are only 50 trading days away from the referendum, of which outcome is completely impossible to guess.

Looking at the implications for the European Union of a U.K. BREXIT, obviously one can construct many scenarios, by which sterling could fall, but it could also very equally rise in the wake of an exit vote.

The latest “Yougov” BREXIT poll shows the “stay” and “leave” preferences both at 39 percent while 17 percent remain undecided.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

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China's GDP growth data remained steady at 6.7 percent in the first quarter. Many criticize Chinese data as not representing what's actually going on in the real economy.
china, fed, economy, investors
Friday, 15 April 2016 11:38 AM
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