World Bank Downgrades Growth Forecasts Yet Again (And More Doubts on Chinese Data

[Joanne98]

I am beginning to feel as if I am being gaslighted. For those not familiar with the reference. Gas Light was a 1930s play in which a scheming husband keeps turning the gas lights in his house up and down, then keeps telling his wife that she is crazy when she comments on the changes. He eventually succeeds in driving her nuts.

The continuing efforts to find the most positive spin in any data release and put it in headlines continues. I just looked at the New York Times and saw "US Recovery Could Outstrip Europe's Pace." The article is admittedly more measured, but the headline implies a recovery is on in both the US and EU, which is not yet a foregone conclusion.

However, to show that the picture is a tad more complicated, DoctoRX passed along the fact that the World Bank has downgraded its 2009 global growth forecast, from a 1.7% contraction to negative 3%. This is a big change, and from what I can tell, has NOT been picked up by the major media, when past World Bank forecast changes have been. It feels as if we have controlled media.

From the World Bank:

The world economy is set to contract this year by more than previously estimated, and poor countries will continue to be hit hard by multiple waves of economic stress, said World Bank Group President Robert B. Zoellick today.

Even with the stabilization of financial markets in many developed economies, unemployment and under-utilization of capacity continue to rise, putting downward pressure on the global economy.

According to the latest Bank estimates, the global economy will decline this year by close to 3 percent, a significant revision from a previous estimate of 1.7 percent. Most developing country economies will contract this year and face increasingly bleak prospects unless the slump in their exports, remittances, and foreign direct investment is reversed by the end of 2010.

“Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” Zoellick said ahead of the Group of Eight finance ministers meeting in Italy.

Separate but related is that some of the cheery data coming out of China does not bear close scrutiny. Yesterday, Bloomberg noted that car sales in China spiked. Today we learn that the definition of a "sale" is a shipmment from the factory, whether the car has a buyer or not. And the number of registrations, a much better measure of end purchases, is much lower that the supposed sales figures.

From MetalMiner (hat tip reader Michael):

There are some apparently contradictory numbers coming out of China at the moment. Take those car sales as an example. Our man on the ground tells us BYD, a noted Chinese car maker, reported 30,000 car sales of one model by end of last year, but the number plate agency recorded only 10,000 new cars of that model registered for use on the road. What happened to the other 20,000 are they running around without number plates? In a police state, I don’t think so. Our understanding is auto sales are recorded in China when they leave the factory, not when they are registered on the road, so dealers can build up inventory while car “sales” are rising.

Coming back to Mr. Setser in a fine analysis on the impact of a fall in China’s exports he explores the apparent dichotomy of falling electricity consumption, falling industrial production and yet rising GDP. Even Mr. Setser wasn’t able to conclusively get to the bottom of that one although his overall conclusion was that the economy was growing and it must largely be on the back of domestic consumption as exports and employment remain depressed.

These disconnects call into question our tendency to take official proclamations at face value, and we should also be careful about taking one or two months data and extrapolating that to a longer term trend. In a market so heavily influenced by state controls, a short term trend can be the distorted result of government actions rather than the more reliable measure of a sum of company actions taken over an unfettered economy. Growing China certainly is a trend, but how comprehensively across the economy and how sustainably remains to be seen.

If Setser can't reconcile the data, I'd say it needs to be taken with a handful of salt.

http://www.nakedcapitalism.com/2009/06/world-bank-downgrades-growth-forecasts.html

[WannaJumpMyScooter]

1. no. doubts on Chinese data?

ah, come on... they are gonna save the world.

just ask 'em

or any of the "economists" who were still pimping US auto stocks as recently as fall

[madrchsod]

2. china is falling apart ...

the country side is coming dangerously close to open revolt. millions are unemployed in the major industrial regions. their reliance on the dollar and our market has put them in a dangerous economic and societal position.they can not increase their stimulus with out making sure our money is worth more than theirs. we are bailing out the banks and china.

take a minute and think of this---->an estimated 32 million men will never be married due to the one child policy and the chinese tradition of males being more important than females.

[CoffeeCat]

3. It's the silver-lining campaign...ad

I agree Joanne. We are being sold a whole lot of hooey by the MSM, regarding the economy.

It is obvious that the "powers that be" instructed our MSM to cease and desist the gloom-and-doom
media coverage that dominated the news during Q4 08. Q1 09 was a farcical trip into green-shoot-silver-
lining-fantasy land.

I have struggled with what is going on and why this is happening. Is it benign? Is this the Obama
administration and Wall Street simply saying that if consumers constantly hear how bad it is, then
things will never pick up--so we need to be more positive? Or...are we being kept in the dark about
the grave reality and the eventual implosion of the U.S economy for darker purposes?

The things that bothered me the most: The banks reporting "record profits" in Q1--after supposedly
being near death 20 days earlier. How is that possible when the credit markets were frozen and consumers weren't
borrowing? This positive info coming from the banks causes a couple of stock-market rallies, including
a one-day, 300-point surge. WTH? Also, March housing starts were "up" and this was touted as evidence
of a major recovery. After closer inspection of the numbers, it was clear that the increase was due to
more apartment construction, not housing. This signals decreased consumer confidence--with more people
wanting to rent than buy a home. The MSM never reported this "correction".

There are countless examples of stories like this. It's mind boggling.

Another tactic is to take a bad statistic and to twist the headline, "Look it's not as bad as we thoughT! Things
are getting better!" This is a tactic used when companies report quarterly earnings, and also when the
unemployment numbers and GDP numbers are released.

And another point---who in the hell are these people making the initial estimations? Why are they valid if those
estimations are wrong and how in the hell are those incorrect estimations even relevant??? If my husband estimates
that our family income will fall $1,000 in Q2 09, and it really falls $800---what the hell difference does it make that
his initial guess was wrong? Our family is still losing $800 per month. We don't experience some kind of magical, wonderful
experience because the reality is $200 less than his initial projection. We're still in hell. ...But the media
focuses on the fact that it's "Not as bad as we though! Whooo hoooo!" and puts that in the headline. They cover
up the fact that we're in a free fall---a long descent.

I'm just sick of it.

I'm at the point now, where I've tuned it all out. I'm tired of reading MSM stories about the economy--and feeling like
I need a decoder ring to figure out the reality. They lie. They twist. They "green shoot" us to death, with
reality distorted and hidden.

Sick of it...really, really sick of it.

I'm just an average American with a family. I'm trying to figure out where to park our savings, where to
put our 401k, and how to prepare for the future. I'm being prevented from fully understanding our economic
reality or our future--and it's very aggravating.

[wuvuj]

4. Some real information?

http://www.voxeu.org/index.php?q=node/3421&ref=patrick.net


New findings:

* World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.

* World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.

* There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.

* The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.

* Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.