I am beginning to feel as if I am being gaslighted. For those not familiar with the reference. Gas Light was a 1930s play in which a scheming husband keeps turning the gas lights in his house up and down, then keeps telling his wife that she is crazy when she comments on the changes. He eventually succeeds in driving her nuts.
The continuing efforts to find the most positive spin in any data release and put it in headlines continues. I just looked at the New York Times and saw “US Recovery Could Outstrip Europe’s Pace.” The article is admittedly more measured, but the headline implies a recovery is on in both the US and EU, which is not yet a foregone conclusion.
However, to show that the picture is a tad more complicated, DoctoRX passed along the fact that the World Bank has downgraded its 2009 global growth forecast, from a 1.7% contraction to negative 3%. This is a big change, and from what I can tell, has NOT been picked up by the major media, when past World Bank forecast changes have been. It feels as if we have controlled media.
From the World Bank:
The world economy is set to contract this year by more than previously estimated, and poor countries will continue to be hit hard by multiple waves of economic stress, said World Bank Group President Robert B. Zoellick today.
Even with the stabilization of financial markets in many developed economies, unemployment and under-utilization of capacity continue to rise, putting downward pressure on the global economy.
According to the latest Bank estimates, the global economy will decline this year by close to 3 percent, a significant revision from a previous estimate of 1.7 percent. Most developing country economies will contract this year and face increasingly bleak prospects unless the slump in their exports, remittances, and foreign direct investment is reversed by the end of 2010.
“Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” Zoellick said ahead of the Group of Eight finance ministers meeting in Italy.
Separate but related is that some of the cheery data coming out of China does not bear close scrutiny. Yesterday, Bloomberg noted that car sales in China spiked. Today we learn that the definition of a “sale” is a shipmment from the factory, whether the car has a buyer or not. And the number of registrations, a much better measure of end purchases, is much lower that the supposed sales figures.
From MetalMiner (hat tip reader Michael):
There are some apparently contradictory numbers coming out of China at the moment. Take those car sales as an example. Our man on the ground tells us BYD, a noted Chinese car maker, reported 30,000 car sales of one model by end of last year, but the number plate agency recorded only 10,000 new cars of that model registered for use on the road. What happened to the other 20,000 are they running around without number plates? In a police state, I don’t think so. Our understanding is auto sales are recorded in China when they leave the factory, not when they are registered on the road, so dealers can build up inventory while car “sales” are rising.
Coming back to Mr. [Brad] Setser in a fine analysis on the impact of a fall in China’s exports he explores the apparent dichotomy of falling electricity consumption, falling industrial production and yet rising GDP. Even Mr. Setser wasn’t able to conclusively get to the bottom of that one although his overall conclusion was that the economy was growing and it must largely be on the back of domestic consumption as exports and employment remain depressed.
These disconnects call into question our tendency to take official proclamations at face value, and we should also be careful about taking one or two months data and extrapolating that to a longer term trend. In a market so heavily influenced by state controls, a short term trend can be the distorted result of government actions rather than the more reliable measure of a sum of company actions taken over an unfettered economy. Growing China certainly is a trend, but how comprehensively across the economy and how sustainably remains to be seen.
If Setser can’t reconcile the data, I’d say it needs to be taken with a handful of salt.