The markets are awaiting China’s data for third-quarter gross domestic product — slated for publication Monday — with a combination of trepidation and skepticism.
Trepidation that the data might show a sharper slide in growth.
Skepticism that the numbers can be trusted.
There’s little doubt that growth in the third quarter remained weak.
Our GDP tracker, which bundles together a set of monthly series that move closely with GDP, came in at 6.6 percent year on year in July and August.
Based on early and forecast data, September’s reading is likely to be roughly the same.
Second-quarter readings for our GDP tracker also averaged 6.6 percent, undershooting the 7 percent outcome reported by the National Bureau of Statistics (NBS).
In that case, though, it was surging financial sector output that accounted for the difference (our GDP tracker doesn’t capture what’s going on in the financial sector).
In the third quarter, that’s unlikely to be the case.
The boom in the equity markets, which we estimate added 0.5 percentage point to growth in the first half, has turned to bust.
That suggests the financial sector’s contribution to GDP in the third quarter will be smaller — perhaps substantially smaller.
A 6.6 percent reading would be sharply below the government’s 7 percent target for the year.
But that doesn’t mean it’s impossible.
In the fourth quarter of 2008 and the first quarter of 2009, the NBS reported growth at 7.1 percent and 6.2 percent — substantially below the 8 percent target for those years.
We don’t share the skeptical view that China’s data are the subject of massive political distortions.
At the same time, it’s noteworthy that, in the past, growth has dropped substantially below target only at times of international crisis.
Against that backdrop, we think the consensus forecast for 6.8 percent growth in the third quarter, paving the way for a reading of 6.9 percent for the year as a whole, makes sense.
Beyond the headline numbers, we’ll also be looking for the latest signs on real estate, where so far a pickup in sales has not triggered a revival in construction.
We’ll also be looking at the NBS wage data and the Ministry of Human Resources index of labor market supply and demand for signs that weakness in growth is contributing to slack in labor markets.
The views expressed in this article are those of Tom Orlik and Fielding Chen, economists at Bloomberg Intelligence.
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