Thursday, January 10, 2013

China power demand as NOT a proxy to true GDP

This is what Otto says:

China power demand as proxy to true GDP

The "Peru Electricity Demand vs GDP" post of the other day that showed the close releationship between power demand and GDP growth went down well, with one mailer asking whether I had the China electricity numbers so that a decent stab at the real rate of growth could be made. That mail slipped my mind at the time but I was reminded of it just minutes ago while flicking through this excellent set of charts on China from Reuters (there are loads and they're really good, go see). Here's the power output chart from the set:

There you go: Real, unspun GDP number for China today? 6.4%.

Nope, wrong. In fact, here are several reasons why you're wrong:

1. The China y-o-y power demand growth curve will have a negative component, because China's government is (at least pretending to be) intervening in the industrial sector to shut down marginal (i.e. high-power-consumption low-profit) businesses. All (purportedly) in the name of improving per-unit-power-consumption productivity across the economy. So China's real unspun GDP number today is not 6.4%.

2. If China's transitioning from export to domestic consumption, and from industrial production to domestic services, this will also put a negative component in the y-o-y growth curve, assuming services use less power-per-unit-GDP than industry.

3. This whole "ooh, let's follow the power use for a true GDP measure because China's government lies all the time" thing is so 2009. Since then, the Chinese authorities have heard about it, with the result that now the power consumption numbers themselves have also become massaged.

So as you can see, you're wrong. Neener neener.

Though in the case of a less obfuscated country like Peru, using power as a proxy is probably good - though I'd still ask what the per-unit-of-GDP power intensity of mining is, compared to some other kind of business, cos if most economic growth is in mining you'll this time get a positive skew. (What do you guys do down there for a living besides mine gold and grow oranges, anyway?)


  1. Oranges? Top activities include:

    Fishery and fish meal
    Asparagus, grapes, mangos, avocados (way before oranges)
    Complaining about government
    Complaining about Chile
    Watching pisspoor futbol

    1. You misspelled "complaining about pisspoor futbol".

    2. You're right, I forgot the accent: FĂștbol.