Chinese economic statistics don’t come with a grain of salt; they come with an entire salt mine.
The national government is widely known to demand exact growth from provinces and cities, where politicians report numbers that are shockingly close to their forecasts. While the Chinese government has reported slower economic growth, the recent 6%-plus GDP growth still seems a wee-bit optimistic, especially when you look at other indicators.
Wells Fargo energy analyst Roger Read has looked at the Chinese demand for diesel fuel, which is required to run all the heavy machinery used in manufacturing, construction, and even agriculture. According to his work, monthly diesel demand began dropping off in December of 2017, and then fell off a cliff this past March and April, down 14% and 19%, respectively.
In a note, Read said:
“We believe the accelerating decline is most likely tied to economic factors and the effects of the tariff ‘war’ with the U.S. (lifted demand earlier in 2019 to ‘beat’ the tariffs, but now falling). If one wants to worry, that is where to focus most closely in our view.”
The news isn’t surprising, but it could cause consternation in countries close to China that rely on the Middle Kingdom for commerce. If the giant nation is slowing down more than it lets on, countries like Singapore, Japan, South Korea, and Australia could be in for a rough second half of 2019.