When you have to learn something about economics from the Chicoms, then a nadir of literacy and sobriety is truly at hand.
We are referring to China’s release of middling economic data for April and the fact that Beijing didn’t hesitate to go where the bullish stock peddlers of Wall Street studiously avoid: Namely, in releasing their key April macro data—industrial production, retail sales and fixed asset investment—-they showed the two-year stacked changes in order to nix the thought that a base-effect driven “boom” in the YoY monthly numbers is anything real or sustainable.
Thus, while industrial production was up a healthy 9.8% in April over prior year, the release pointed out that the two-year stacked CAGR was just 6.8%. By Chinese standards—and whether the numbers are cooked or not—that’s borderline recessionary. Still, the red suzerains of China’s vast debt- and speculation-ridden economy at least admitted it.
Likewise, retail sales rose 17.7% on a year-over-year basis in April, but they had actually fallen 7.5% last year in the midst of the original Chicom version of home arrest there and Covid-Lockdown here.
As China’s statistical agency admitted, therefore, the 2-year compounded increase in retail sales was only a little more than 4% per annum. And in a dictatorship where the only thing its ruthless rulers have on offer to the Chinese people is the faux prosperity of borrow, invest and spend, a 4% retail spending CAGR is a dire number indeed.
But it was the data for the unsustainable economic pile driver which makes the Chinese economy appear to go—fixed asset investment—that was the real eye-opener. During the first four months of 2021, total fixed asset investment (state owned and private) was up by 19.9% from the first four months of 2020.
As shown in the chart below, that surge might well be enough to get the bullish “booming-rebound”narrative gushing on Wall Street. After all, the line for 2021 sure looks vertical.
Year-Over-Year Growth In Fixed Asset Investment—Implied Boom
But not so fast. Here is exactly the same data, but on a two-year stacked basis. The resulting April CAGR is just 3.7% per annum for total investment and only 2.4% for the all-important private investment component of the figures.
As Jeffrey Snider queried, where’s the boom?