Is Chinese GDP driving the world’s economy?
Macro Insight
QuantCube Macro Nowcast solution signals China GDP as a strong leading indicator for other economies
QuantCube’s macroeconomic nowcasting predicts GDP growth for the main economies in real-time by leveraging various types of alternative data. They include geolocation data based on real-time international traffic, geospatial data such as satellite data to estimate urban growth at city level, and textual data to estimate sentiment index.
With a expenditure approach, QuantCube is able to track most GDP components based uniquely on alternative data sources. The observation is then used to predict the uptrends or downtrends of specific components such as employment at sector level, commodity exports and imports, inflation of fruits & vegetables, etc. Based on unique QuantCube macro daily data from January 2, 2014 to August 31, 2021, we computed correlations between China’s GDP and countries with different lags. Figure 1 below shows the results where GDP correlation increases significantly when the lag widens, demonstrating that GDP in China is a leading indicator of GDP in the US, Eurozone and Japan. For example, the correlation between Chinese GDP and German GDP is 0.59 when there is no lag for Germany, but this increases up to 0.94 with a lag of 52 days. Optimal correlation points are obtained with 19 days lag for the US and 52 days lag for Germany. Data for both countries recorded over 0.90 correlations with Chinese GDP when these lags were taken into account.
Previously we carried out a similar study using the data from Jan 2014 to Dec 2019, the period where no effect from the pandemic was present. Interestingly with or without the impact from COVID-19 we observe similar results for the relationship between Chinese GDP and the world major economies. This suggests that China has been leading the world growth in the last few years.
About QuantCube’s GDP nowcasting
Within QuantCube Technology, we developed a nowcasting tool for U.S. GDP in real-time by using our proprietary AI technology on various alternative sources of information. They include (i) proxy of international trade of goods stemming from a real-time tracking of 80000+ ships around the globe, (ii) a proxy of the job market from the analytics of the job offers per sector, and (iii) proxy of urban growth at city level based on satellite data analytics. Those alternative data points are available on a daily frequency without any publication lags. QuantCube’s powerful macroeconomic intelligence is being used at the major financial institutions and government bodies around the world.
