naked capitalism

If you believe the China fourth quarter GDP release, I have a bridge I’d like to sell you.

Some analysts see power consumption as a more accurate proxy of economic activity than GDP releases. Consider then the following report from Bloomberg on January 12:

Power consumption fell 4 percent in October from a year earlier, the first decline since March 2005, and 9.6 percent in November, according to state data. The government has yet to release December figures.

Now there is a discretionary element in power usage, and formerly profligate users can suddenly start belt-tightening. And since energy in China is subsidized, there were not strong incentives to curtail use in when oil prices spiked in the first half of 2008. So it is not unreasonable to think power consumption could decline faster than economic activity.

Nevertheless, a plunge in energy use seems inconsistent with even a slow level (by Chinese standards) of economic growth. Consider the key section of today’s Bloomberg report on China’s GDp release (boldface ours):
Gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent gain in the previous three months, the statistics bureau said in Beijing today. The figure matched the median estimate of 12 economists surveyed by Bloomberg News.

Nevertheless. the expected report was treated as if it were surprising:

“It’s an astonishingly steep slowdown,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “We haven’t yet seen all of the pain.”…

The economy’s “implosion” poses a threat to the Communist Party’s rule and increases the likelihood that the government will devalue the yuan, prompting a trade war, according to Albert Edwards, a London-based global strategist for Societe Generale SA….

Exports will decline 6 percent this year, down from a 17.2 percent gain in 2008, according to Fitch Ratings. China has already stalled gains by the yuan against the dollar to aid exporters….

A sagging property market makes a quick economic rebound less likely. House prices across 70 cities dropped for the first time on record in December and construction will contract 30 percent this year, according to Hong Kong-based Macquarie Securities property analyst Eva Lee.

Economic growth may weaken to 2 percent in 2009, the slowest pace in at least 30 years, according to Ryan Atkinson, chief market analyst at New York-based hedge-fund manager Balestra Capital Ltd.

I’m waiting for the December power consumption data.