OMOVEMENTS OF MICRONS quick. This makes it difficult to contain, even for China, which is trying to quickly suppress any outbreak. A cluster of infections in Shanghai, for example, forced the government to impose a hasty lockdown for which it appears woefully ill-prepared.
The speed of the variant also makes China’s economic outlook exceptionally difficult to follow. A lot can happen between the release of a data point and its reference period. The most recent figures on the Chinese economy refer to January and February. These (surprisingly good) numbers look dated, even quaint. For most of this period, there was no war in Europe. And new covid-19 cases in mainland China averaged less than 200 a day, down from 23,107 reported on April 7. Relying on official economic figures is like using a rearview mirror to navigate a chicane.
For a more timely view of the Chinese economy, some analysts are turning to less conventional indicators. Baidu, a search engine and mapping tool, offers, for example, a daily mobility index. In the week to April 3, that figure was more than 48% below where it was a year ago. The index is best suited for tracking movement between cities, says Ting Lu of Nomura, a bank. To measure unrest in cities, it uses other indicators, such as subway rides. In the week ending April 2, subway rides in eight major cities were nearly 34% lower than a year ago. In Shanghai, where many metro lines are now closed, the number of trips has fallen by 93%, a worse drop than at the start of 2020.
The two figures that most worry Mr. Lu follow distribution services. In the week ending April 1, an index of express deliveries by courier companies was nearly 27% below its level at a similar point last year. Over the same period, a road freight index fell by 12.8%. The decline appears particularly steep because the measure was rising rapidly at the end of last year.
Unconventional measurements are all the more valuable in China because of doubts about official data. The strong January and February numbers, for example, are not only old but strange. They suggest that investment in “fixed” assets, such as infrastructure, manufacturing facilities and real estate, increased by 12.2% in nominal terms, compared to the previous year. But that’s hard to reconcile with double-digit declines in steel and cement production. The recovery in real estate investment also looks special alongside the fall in home sales, housing starts and land purchases. When some local governments said they were checking their numbers at the request of the National Bureau of Statistics (SNB), it has become apparent that official statistics look strange even to official statisticians.
China’s high-frequency indicators proved their worth in the spring of 2020. Economists were initially hesitant to revise their growth forecasts downwards. No one knew exactly how the economy would react or what SNB would be prepared to report. Armed with evidence from high-frequency data, forecasters were finally brave enough to predict a GDP decline in the first quarter of 2020. Indeed, it contracted by 6.8%, even according to official figures.
The timeliness of unconventional indicators makes them valuable in times of flux. Still, “there are many pitfalls,” says Lu. Any short period can be distorted, for example by bad weather or holidays. And annual growth rates can be skewed by past idiosyncrasies. Also, what does a dramatic weekly decline in road freight mean for the quarters GDP growth? It is impossible to say precisely. Many indicators also have only a short history. Like a PhD student, Mr. Lu trained in econometrics. “But with only one or two years of data, if I used the kind of techniques I learned in school, people would laugh at me.”
To help avoid some of the pitfalls, Mr. Lu and his team are looking at “a bunch of numbers”. “If seven or eight indicators out of ten deteriorate, then we can be sure that GDP growth is deteriorating,” he says. Right now, he thinks, “something must be very wrong.” ■
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This article appeared in the Finance and Economics section of the print edition under the title “Looking in the rearview mirror”