How Badly Overstated is Chinese and US GDP?

-edited

China's GDP unexpectedly cooled again, but to an amazing six percent. It's likely way overstated. What about the US?

Unexpected Slowdown

Similarly, CNBC reports China says its economy grew 6% in the third quarter, slower than expected

Worse Than It Looks

Funding Non-Productive Activity

Pettis objects to China's GDP numbers based on "non-productive activity".

By that measure, what about the US dropping bombs, fighting wars all over the word, keeping troops in Germany and Japan, and overpayment of government employees and their bloated pensions?

And that's just for starters.

Mike "Mish" Shedlock

Comments (45)
No. 1-10
Sechel
Sechel

Western Economists used to try and guess China's true GDP based on public electric consumption data but as China's economy has become more serviced based this is no longer effective.. Also China counts GDP when an item is manufactured, not when its sold so if they build something that sits in a lot it counts.

Herkie
Herkie

I trust nothing from China as far as numbers go, and I am beginning to trust nothing in the west either. Their accounting practices are not exactly FASB standard. As to overstating GDP impossible to tell with China, but in the USA GDP is deflated by a number that is dependent upon the rate of inflation, if you are understating inflation you are overstating GDP. So, our GDP is overstated by the cumulative amount that inflation has been understated, and that is immense. Housing alone would indicate that inflation is far higher than the headline so after more than 20 years just since the latest fraudulent system of measuring inflation was started we are talking about a lot of GDP that never existed.

Bam_Man
Bam_Man

How much of US GDP is represented by obscenely over-priced "healthcare services"? Something around 15% I believe.

JonSellers
JonSellers

What would be a productive use of capital in a deflationary world? In a world that is producing more stuff than the population can afford to buy, there is essentially no productive use of capital. Speculation on asset prices is the smartest use of capital in this environment. Just don't speculate with more than you can afford to lose.

Augustthegreat
Augustthegreat

OER (owner equivalent rent) represents a significant part of GDP in the US. Prostitution is also counted into GDP in many european countries. The best part is that India counts bull and horse shits into its GDP.

hmk
hmk

The prostitution comment made me wonder how much the underground economy, ie drug sales, under the table labor services etc contribute to reported GDP.

Realist
Realist

To be counted as part of GDP it needs to be recorded. Since the underground economy, black market, and other illegal activities are not recorded, they are not counted.

Maximus_Minimus
Maximus_Minimus

Just a few days ago, there was a post about debt propping up GDP numbers, declining utility of debt:

What's needed is a debt adjusted GDP indicator.

Casual_Observer
Casual_Observer

This is why it's more important to look at productivity growth as a measure of true growth. Productivity growth has been lower than 2% for most of time since 2000.

EEUA
EEUA

Why do we still use such a meaningless number as GDP? Isn't it better to just watch raw commodity data and compare it to satellite imagery of forest loss, est. raw amounts of concrete used, etc? As soon as AI and quantum computing gets to where it needs to, we shall be able to take more accurate accounting of Earth's stocks and flows, and from that data, we should be able to peg a more realistic number to currency instruments, whether we have several based on a specific commodity, or a single unit based upon an aggregated sum of all the various stocks and flows that make up the foundation of what we call wealth. Of course, it is impossible to put a number on human creativity, which is also cornerstone of wealth.