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Chinese Economy Weaker Than Reported, According to Dallas Fed Report

For immediate release: August 23, 2012

DALLASâ??China's industrial electricity consumption suggests that the nation's industrial production growth may be less than official government data have stated, according to the latest issue of the Federal Reserve Bank of Dallas' Economic Letter.

Because economists have long doubted the credibility of Chinese output data, Dallas Fed economists Janet Koech and Jian Wang examined industrial electricity consumption data in China.

In their article "China's Slowdown May Be Worse Than Official Data Suggest," the authors assert that China may have overstated its 2012 industrial production data to mask the economy's weakness.

Their analysis has found a tight relationship between industrial electricity consumption and industrial output. According to this relationship, China should have consumed twice as much electricity as it actually did in the past few months, given the official industrial production numbers.

"Although China's economic growth has slowed sharply in recent months, evidence suggests that the situation may be worse than reported," they write.

The authors mentioned several factors that may have contributed to China's slowdown, including lower demand for Chinese exports from the U.S. and Europe. The report can be found at http://www.dallasfed.org/research/eclett/2012/el1208.cfm

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