From Political Calculations:
,,,So how did a little-read blog manage to report that China's economy had fallen into recession over five months ago, well ahead of all these other venerable institutions?
Easy. That little read blog didn't use China's statistics to assess that nation's economic health. Instead, we used data collected and reported by the U.S. Census on the monthly value of the international trade between the two nations, which we think would be pretty difficult for Chinese officials to fabricate. As it happens, we've found that the year-over-year growth rate of that trade makes it possible to accurately diagnose the relative economic health of each nation, making this kind of analysis an excellent alternative to China's official government statistics for assessing the actual state of that nation's economy.
Speaking of which, here is what it looks like today:
The U.S. Census will update its foreign trade data through May 2012 on 11 July 2012.He's a fan of the Cowles Commission numbers, as kept by Prof. Shiller, which is another point in his favor.
In this chart, assessing China's relative economic health may be done by examining the data series shown with the blue data points, which correspond to the year-over-year growth rate of U.S. exports to China. Here, a national economy will demand more goods and services from outside its borders when it is is experiencing strong economic growth, which shows up as a positive growth rate - the more strongly the economy grows, the higher the positive value.
But when that growth rate turns negative or is near-zero, which we'll define as growing at just single digit rates, that communicates that the national economy in question is experiencing at least a significant economic slowdown.
What we observe in our chart above is that China's economy is trudging along at a very sluggish pace. And for all practical purposes, has been since October 2011.
Meanwhile, the data series shown with the red points, which correspond to the year-over-year growth rates of China's exports to the U.S., indicate that as of April 2012, the U.S. economy has been growing more strongly than the Chinese economy.
With the U.S. economy now passing through the equivalent of a microrecession however, we anticipate the May 2012 trade data will fall back toward the zero growth line on the chart.
But then, we didn't rely on the U.S. government's official economic data to work out that the U.S. economy would be struggling at this point of time. We used an alternative data source to first make that call over a year ago....
It's just a good practice to not rely too much on "official" data reports, which can frequently be really off track. That's also a big reason why our readers our rarely surprised by sudden and unexpected economic news.
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