Tag Archives: Statistics

China’s 7% Growth Mirage——Some Facts Which Prove It, by Michael Lebowtiz

Posted on October 25, 2015 | Leave a comment

From Michael Lebowtiz of 720Global via davidstockmanscontracorner.com:

Mirage

In our latest article, “China Growth – Miracle or Mirage” published October 20, 2015, we questioned whether China’s perfectly forecasted and uniquely steady economic growth is a mirage. On Friday morning, following Chinese Premiere Li’s comment that growth was still in a “reasonable range”, China’s central bank (PBoC) proceeded to cut interest rates as well as the required deposit reserve ratio for major banks. The language of the Premier and the actions of the PBoC are contradictory. Their actions in conjunction with their words offer even more evidence to believe reported growth is a mirage and the correct answer to the question.

This postscript offers a series of facts and recent economic data to lend further context toward determining whether China’s growth is, in fact, a miracle or a mirage. Before viewing the statistics below take a moment to consider the following: If China’s economy is in fact humming along at a “reasonable” 6.9% pace, then what is the logic and motivation behind aggressively easier monetary policy? Put another way, what don’t we know about the Chinese economy?

Central Bank Actions

-1yr Benchmark Lending Rate: Since November 2014 China has cut their 1 year interest rate 6 times. Over this period the rate has been lowered from 5.60% to 4.35%

-Required Deposit Reserve Ratio for Major Banks (determines amount of leverage banks can take and therefore the amount of loans they can make): Since February 2015 China has lowered it 4 times from 19.50% to 17.50%.

-Renminbi: Since August China devalued their currency 2.8%

Economic Statistics

-China export trade: -8.8% year to date

-China import trade: -17.6% year to date

-China imports from Australia: -27.3% year over year

-Industrial output crude steel: -3% year to date

-Cement output: -3.2% year over year

-Industrial output electricity: -3.1% year over year

-China Manufacturing Purchasing Managers Index: 49.8 (below 50 is contractionary)

-China Services Purchasing Managers Index: 50.5 (below 50 is contractionary)

-Railway freight volume: -17.34% year over year-Electricity total energy consumption: -.20% year over year

-Consumer price index (CPI): +1.6% year over year

-Producer price index (PPI): -5.9% year over year, 43 consecutive months of declines

-China hot rolled steel price index: -35.5% year to date

-Fixed asset investment: +10.3% (averaged +23% 2009-2014)

-Retail sales: +10.9% the slowest growth in 11 years

-Shanghai Stock Exchange Composite Index: -30% since June

Are these actions and statistics consistent with a country thought to be growing at 6.90% annually?

http://davidstockmanscontracorner.com/chinas-7-growth-mirage-some-facts-which-prove-it/

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Red Swan Descending, by David Stockman

Posted on October 20, 2015 | 1 comment

The Chinese miracle is not so miraculous after all, powered as it has been by debt. The problem with debt is that you have to pay it back. From David Stockman at davidstockmanscontracorner.com:

The proverbial peddlers of Florida swampland can now move over. They can’t hold a candle to the red suzerains of Beijing.

The latter had drawn a line in the sand at 7.0% GDP growth. Conveniently enough, the “consensus” estimate of so-called street economists was pegged at 6.8% for Q3, thereby giving authorities one thin decimal point through which to thread a “beat” at 6.9%.

By golly they did it!

Even then, China’s Ministry of Truth had to fiddle down the GDP deflator to negative 0.5% (for the second time this year) in order to hit the bulls eye. And that’s exactly the point.

No real world $10 trillion economy plagued with all of the turmoil evident in China’s whipsawing trade data or its volatile real estate development sector or its faltering rust belt and commodity-based industries can possibly deliver absolutely stable GDP numbers to the exact decimal point quarter after quarter.

In fact, the odds that these reports represent anything other than goal-seeked propaganda are so overwhelmingly high that they perforce raise another more important question. Why does Wall Street and its servile financial press not issue a loud collective guffaw when they are released?

But no, the Wall Street Journal took it all very seriously, noting both the “beat” and China’s claim that the “miss” wasn’t a miss at all:

The better-than-expected result—a Wall Street Journal survey of 13 economists forecast a median 6.8% gain—is likely to renew debate over the accuracy of China’s growth statistics…….Speaking at an event to promote entrepreneurism in Beijing on Monday, Premier Li Keqiang said “even though it was 6.9%, it is still a growth rate of around 7%.”

Right. China’s #2 communist boss is out promoting the “enterprenurial spirit” while emitting central planning propaganda to the decimal point.

You might find the irony exceptionally rich, but there is a larger message. Namely, the true size of China’s economy is unknowable to the nearest trillion or even several trillions. But that does not prevent most of Wall Street from taking seriously each and every word of China’s self-evidently clueless statist rulers spouting growth rates to the decimal point.

In truth, Wall Street has become so intellectually addled from its addiction to central bank enabled gambling that it no longer has a clue about what really matters. That’s why the next crash will come as an even greater surprise than the Lehman meltdown, and will be far more brutal and uncontainable, as well.

Yet the evidence that a China-led crash is on its way is hiding in plain sight. And what is being blithely ignored is not merely the blatant inconsistencies in its economic numbers—–such as the fact that electricity consumption has grown at only a 1.3% rate over the past year——or that its commerce with the outside world has shrunk drastically, with imports down by 23% and exports off by 3-6% in recent months.

Instead, the evidence that China is a slow-motion trainwreck lies in the very consistency of its Beijing-cooked numbers. Apparently, no one has told its credit-happy rulers that printing precise amounts of new GDP quarter after quarter by issuing credit at double the rate of nominal income growth will eventually result in the mother of all deflationary collapses.

To continue reading: Red Swan Descending

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What Will Cause the Next Recession? by Larry Kummer

Posted on October 15, 2015 | Leave a comment

From Larry Kummer, editor of the Fabius Maximus website, via wolfstreet.com:

Expect the unexpected.

Mainstream economists assure us that a recession remains unlikely in the foreseeable future. They have their reasons.

• They forecast steady slow growth. The Philly Fed’s Survey of Professional Forecasters sees 2.4 – 2.8% real GDP rising through 2018.

• Most indexes of leading indicators remain strong. The ECRI’s Weekly Leading Indicator hit bottom at 105.4 in March 2009; it’s remained above 130 since March 2013; it’s now 132. An exception is the OECD Composite Leading Indicator, which has been slowing since last Sept (“growth losing momentum”).

• Most of the standard warning metrics remain low. The recession probability indicator of Marcelle Chauvet and Jeremy Piper is at 0.3; it was 3.9 in November 2007 (the start of the great recession). The Econbrowser indicator of James Hamelton didn’t work in 2007 and has given odd readings since then.

These tools worked moderately well during the post-WWII era, when the Fed caused most recessions by raising rates to prevent inflation (they took “away the punch bowl just as the party gets going”). That era has ended. In this century unexpected economic shocks cause recessions, their severity depending on the size of the shock and the economy’s strength.

To contine reading: What Will Cause the Next Recession?

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Over 5 Million Non-Existent Jobs: How $1.3 Trillion In Student Debt Broke The “Birth/Death Adjustment,” by Tyler Durden

Posted on October 15, 2015 | Leave a comment

From the lies, damned lies, and statistics department, Tyler Durden at zerohedge.com:

One of the main reasons why the BLS has been massively overestimating job creation ever since great financial crisis, is due to the well-known birth-death adjustment, aka the CES Net Birth/Death Model, which quantitatively is shown on the chart below, has resulted in the “addition” of some 5.3 million jobs, that don’t actually exist, but are merely modeled by the BLS which continues to assume the same new business creation/destruction dynamics that existed before the crisis.

The is a big problem with this core assumption, which has follow through effects not only for domestic fiscal policy, but also monetary policy (and explains why despite a 5.1% unemployment, there is zero wage growth, thus keeping the Fed pushing the ZIRP accelerator pedal years later), for the simple reason that as of this moment it is dead wrong.

Here is what Gallup CEO, Jim Clifton, wrote several months ago looking at the trends in new business creation and destruction in the US.

We are behind in starting new firms per capita, and this is our single most serious economic problem. Yet it seems like a secret. You never see it mentioned in the media, nor hear from a politician that, for the first time in 35 years, American business deaths now outnumber business births.

The U.S. Census Bureau reports that the total number of new business startups and business closures per year — the birth and death rates of American companies — have crossed for the first time since the measurement began. I am referring to employer businesses, those with one or more employees, the real engines of economic growth. Four hundred thousand new businesses are being born annually nationwide, while 470,000 per year are dying.

As Clifton adds “you may not have seen this graph before” and for good reason: it destroys the most sacred assumptions held by the BLS’ cubicled actuaries and various tenured economists locked up in their ivory towers: namely that the number of US business startups outnumbers the number of failures. This is no longer true!

Here is what the above chart shows: until 2008, startups outpaced business failures by about 100,000 per year. But in the past six years, that number suddenly turned upside down. There has been an underground earthquake. As you read this, we are at minus 70,000 in terms of business survival. The data are very slow coming out of the U.S. Department of Census, via the Small Business Administration, so it lags real time by two years.

Gallup adds that business startups outpaced business failures by about 100,000 per year until 2008. But in the past six years, that number suddenly reversed, and the net number of U.S. startups versus closures is minus 70,000.

To continue reading: How Student Debt Broke The “Birth/Death Adjustment”

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Exposing The Lie Behind The “Strong Jobs Recovery” In One Chart, by Tyler Durden

Posted on September 3, 2015 | Leave a comment

From Tyler Durden at zerohedge.com:

With all eyes glued to Friday’s payrolls report, we thought it worth reiterating some ‘facts’ about US employment data. As ECRI notes, the sustained decline in the official jobless rate – now approaching the Fed’s estimate of “full employment” – is a misleading indicator of labor market slack. The data shows that the so-called jobs recovery has been spearheaded by cheap labor, with job gains going disproportionately to the least educated — and lowest-paid — workers.

Indeed, the stagnation in nominal wage growth is consistent with the weakness in the employment/population (E/P) ratio. That said, even the E/P ratio may be overstating the health of the jobs market.

After dropping to three-decade lows in the wake of the Great Recession, the E/P ratio, has barely improved since the fall of 2013, reversing only about one-fifth of its decline from its pre-recession highs. Furthermore – as a breakdown of the E/P ratio by education level shows –this modest improvement is illusory.

Since 2011, when the E/P ratio for those with less than a high school diploma bottomed, that metric has regained almost two-thirds of its recessionary losses (orange line in chart). But the E/P ratio for high school or college graduates – i.e., eight out of nine American adults – has not recovered any of its recessionary losses, and stands about where it started, one, two and three years ago (purple line).

This data shows that the so-called jobs recovery has been spearheaded by cheap labor, with job gains going disproportionately to the least educated — and lowest-paid — workers.

This is scarcely a good basis for resilient consumer spending driven by “solid” job growth that the consensus – including the Fed – is banking on.

http://www.zerohedge.com/news/2015-09-02/exposing-lie-behind-strong-jobs-recovery-one-chart

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Beijing Is Absolutely Lying About Its Economy—Three Charts Which Prove It, by Harry Dent

Posted on August 9, 2015 | Leave a comment

From Harry Dent at davidstockmanscontracorner.com:

I and a few brave experts such as Jim Chanos, Gordon Chang, and David Stockman (speaking at our upcoming IES conference) have been arguing for years that China has the greatest investment and overbuilding bubble in all of modern history.

We’ve also warned that its economic statistics are not real – they are purposefully overstated and then revised later, if at all.

I don’t see how this top-down dinosaur of a centrally planned government can continue in power. I don’t even know how it can exist in a free market/democracy-driven age that already saw the centrally planned economy of the Soviet Union fail miserably.

This is their current strategy to stay in power: Hiring low-skill workers to build more infrastructure and real estate than is actually needed, and keep moving unskilled immigrants from rural to urban areas on a scale never before seen in history…

The demand isn’t even there! They’re just building things no one’s going to use just to keep these people employed and happy. It can’t continue. And when it doesn’t, I don’t see how China will be able to stop these people from revolting.

Since 1983, over half a billion Chinese have moved to the city. 220 million of those just since 2002!

And there are now over 220 million urban residents that are not legal citizens where they live – like illegal aliens from Mexico here in the U.S.

Do you see a problem if this overbuilding and debt-fueled strategy of over-expanding finally ends?

There will be hundreds of millions of unskilled workers stuck in cities. And they won’t even be able to go back to their rice paddies. By now they’re probably paved over with empty condos!

China’s government thinks if it keeps the people employed then they won’t question the corrupt, crony capitalist system in place. So it continues to push its top-down planning through local communist governments that almost totally drive infrastructure and business investment – with no regard whatsoever for free markets!

Sound like a success strategy?

Economists call this an “economic miracle.” The new “state-driven” capitalist model.

I call it absolute BS! Pardon my French.

Adam Smith and the founding fathers of American democracy would have a conniption fit if they heard this!

To continue reading: Beijing Is Absolutely Lying About Its Economy

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WSJ Notes “Chances That China’s Data Is Real Is Very Low” Then Promptly Scrubs It, by Tyler Durden

Posted on July 16, 2015 | 2 comments

The Chinese government fudging its statistics? Perish the thought? The Wall Street Journal kowtowing to the Chinese government? Perish the thought. From Tyler Durden at zerohedge.com:

Last night, when China reported a trifecta of better than expected data, coming at just the wrong time when everyone was hoping for even more PBOC easing and government intervention to bolster the rigged (by now nobody doubts there no longer is a Chinese stock market but merely yet another “policy tool”) market’s upward trajectory.

Ironically, none other than the Chinese economic data aggregator and reporter, the NBS, essentially confirmed the data is fabricated when it said, and we quote:

CHINA’S GDP ‘NOT OVERESTIMATED’, NBS SHENG SAYS
Because there is nothing quite like an official denial to confirm what everyone has known for years.

But that was not what caught our attention in the overnight data, and its broad coverage.

What did was the original WSJ summary report on the Chinese data, which contained the following rare admission of just how rigged not only China’s stocks are, but its entire economic reporting:

To continue reading: WSJ Scrubs Quote on Chinese Data

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Counting The Workers The BLS Doesn’t Count—–The 2014 Unemployment Rate Was Actually 11.4%, by Diana Furchtgott-Roth

Posted on April 14, 2015 | Leave a comment

A little math. The unemployment rate is the number of people who do not have a job and are looking for work, divided by the total labor force. Unless the unemployment rate is 100 percent, the numerator will always be smaller than the denominator. When people leave the labor force, it subtracts from both, but because the numerator is smaller than the denominator, it has a proportionally greater impact on the numerator, which means that unemployment rate declines. (Imagine a town with a hundred workers, fifty of whom are unemployed but looking for work. The unemployment rate is 50 percent. 25 of the unemployed give up, quit looking, and leave the labor force. The unemployment rate declines to 33.3 percent: 25 still unemployed and looking for work, divided by 75 total workers). This may seem tedious, but a lot of people do not understand how a declining labor force participation rate drives down the unemployment rate. Here is why the unemployment rates is significantly understated, from Diana Furchtgott-Roth at http://www.economics21.org:

The March jobs numbers, released on Friday, were disappointing not only for the lower level of job creation, but for the continued decline in the labor force participation rate, the share of Americans who are working or looking for work. The participation rate is now at 62.7 percent, equivalent to February 1978 levels.

The creation of 126,000 jobs in March was about half of what was predicted. This number will get revised because it is part of the Labor Department’s survey of establishments, which is not yet complete. The March job creation figure might even get revised back up to 200,000 by the time all the corrections, including annual benchmark revisions, are completed.

In contrast, the steady decline in the labor force participation rate will not get revised, although it may eventually reverse itself with changes in economic opportunities and incentives. The data are derived from a one-time survey of households that is only updated when population estimates are revised. Over the past few years, the trend has been only in one direction—down—despite steady but slow economic growth over the past few years.

http://www.economics21.org/commentary/more-americans-give-looking-work-04-08-2015

To continue reading: The 2014 Unemployment Rate Was Actually 11.4 %

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Breaking Bad (Debt)–Episode One, from The Burning Platform

Posted on March 1, 2015 | 2 comments

A comprehensive look at debt in several parts, from theburningplatform:

“At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” – Fed chairman, Ben Bernanke, Congressional testimony, March, 2007

“Capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.” – James Grant, Grant’s Interest Rate Observer

The Federal Reserve issued their fourth quarter Report on Household Debt and Credit last week to the sounds of silence in the mainstream media. There were minor press releases issued by the “professional” financial journalists regurgitating the Federal Reserve’s storyline. Actual analysis, connecting the dots, describing how the massive issuance of student loan and auto loan debt has produced a fake economic recovery, and how the accelerating default rates in auto loans and student loans will produce the next subprime debt implosion, were nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet. Their job is not to analyze or seek truth. Their job is to keep their government patrons and Wall Street advertisers happy, while keeping the masses sedated, misinformed, and pliable.

Luckily, the government hasn’t gained complete control over the internet yet, so dozens of truth telling blogs have done a phenomenal job zeroing in on the surge in defaults. The data in the report tells a multitude of tales conflicting with the “official story” sold to the public. The austerity storyline, economic recovery storyline, housing recovery storyline, and strong auto market storyline are all revealed to be fraudulent by the data in the report. Total household debt grew by $117 billion in the fourth quarter and $306 billion for the all of 2014. Non-housing debt in the 4th quarter of 2008, just as the last subprime debt created financial implosion began, was $2.71 trillion. After six years of supposed consumer austerity, total non-housing debt stands at a record $3.15 trillion. This is after hundreds of billions of the $2.71 trillion were written off and foisted upon the backs of taxpayers, by the Wall Street banks and their puppets at the Federal Reserve.

http://www.theburningplatform.com/2015/02/27/breaking-bad-debt-episode-one/

To continue reading: Breaking Bad (Debt)-Episode One

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