Chinese Farmers Spend Like Maniacs In 2014

I was surprised by how high the Chinese GDP was in 2014 given than real estate investment collapsed and even went negative year-on-year in December. It turns out the NBS may have cooked up as much a 1% of GDP growth from rural consumption data.

Revisiting Chinese Consumption

Gordon Orr at McKinsey China was also puzzled by the consumption data and not only stumbled upon the source of consumption growth but uncovered very large data gathering change by the CNBS. Looking at the data he noticed that urban consumption growth slightly outpaced income growth but not enough to be responsible for the required consumption growth. However, when examining rural consumption growth he noted that official YoY consumption grew at 27%. Let me repeat that: according to the China National Bureau of Statistics rural consumption grew 27% from between 2013 and 2014.

That's a huge jump during a period when agricultural prices were not soaring and fourth-tier city real estate was tumbling.

From that blog's sourced article:

That meant rural citizens were the main source of the lower national savings rate. And indeed, the statistics report that the rural savings rate fell from 26% in 2013 to 15% in 2014 on the back of a 27% increase in consumption (versus a 12% increase in 2013). I didn’t see what would have caused this, nor do I see signs that consumer goods companies are suddenly selling a lot more in rural areas.

Back to the prior blog:

Third, if this data methodology revision is not included into 2014 GDP, official GDP would be at least 1% lower doing some basic back of the envelope math. Conversely, if this new method is applied historically, this would increase Chinese GDP by approximately 1% annually. These are not insignificant data revisions.

Copper, iron ore, real estate investment and so on, tell the tale.

GDP is a garbage data point, and for China that goes double.