Chart of the Week: Fathom Consulting believes China’s economy is weaker than official data imply

Officially, China’s economic growth fell to 6.2% in Q2 – a record low for this quarterly measure, first published in the early 1990s. Nevertheless, Fathom Consulting believes that true growth has been weaker than that. Indeed, its own measure of China’s economic activity — the CMI — slipped for the third consecutive month to 4.8% in May.

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When Fathom’s measure first started to deviate from the official estimate in 2013-15, it faced criticism that a broader basket of indicators, besides the three identified by Premier Li Keqiang and used to inform its CMI at the time, would better capture economic activity as China’s policymakers attempted to rebalance toward ‘new-model’ growth. In response, it expanded its suite of indicators from three to ten, ensuring the inclusion of ‘new-model’ variables, while avoiding measures used in the construction of the official expenditure components of GDP. Despite that shift, which resulted in the creation of its CMI 2.0, the big picture was largely unchanged: half-hearted attempts to rebalance had derailed the economy, and growth had slowed sharply through to 2016, at which point China resorted to its old-growth model, unleashing off-balance-sheet lending in a bid to support growth. Problematically for Beijing, as Fathom explained in more detail to its clients in its latest Global Economic and Markets Outlook presentation, old-model growth is producing increasingly less bang for its buck.

The chart in this article has been created using Chartbook on Datastream. The Chartbook was initially created by Fathom Consulting in 2012 and is now a catalogue of approximately 9000 charts, covering over 170 countries, analysing up-to-date macro and financial data. Whether it is a particular topic, country or variable you are interested in charting, the Chartbook has everything you need. To access Chartbook via Datastream search ‘cbook’.