Fathom’s own measure of economic activity in China, our China Momentum Indicator, stood at 2.2% in February. That is unchanged from the January reading, a whisker below December’s 2.3%, and well below last week’s official GDP estimate.
Last week, working to its usual tight deadline, China’s National Bureau of Statistics published its estimate of output during the first quarter of this year, beating many other statistical agencies by a number of weeks. Officially, growth slowed by 0.1 percentage points to 6.7% in the four quarters to 2016 Q1, meaning that it remained comfortably within Beijing’s target range of 6.5% to 7.0%.
As our regular readers will be aware, we have been sceptical about the accuracy of China’s official data for some time. Indeed, our own measure of economic activity, our China Momentum Indicator, has deviated from that reported by China’s National Bureau of Statistics since 2013 and suggests that growth could be as low as 2.2%. Unchanged from the January reading, this suggests that the pace of China’s slowdown has eased, even if the economy has not yet turned the corner.
In our latest Global Economic and Markets Outlook, we put forward the case that Beijing was likely to throw in the towel on rebalancing and ‘double down’. That meant a return to the old ways, with growth driven primarily by investment. Data out last week provides the first concrete evidence of this. And while ‘doubling down’ will boost growth in the short-term, ultimately it implies even more excess capacity and can only add to China’s substantial non-performing loan problem.