Finding data that accurately reflect real economic activity and are not easily manipulated for political reasons is a key challenge in assessing the Chinese economy. Earthmover sales and usage offer one such indicator. Current data from Komatsu for monthly use hours of machines in China strongly suggests economic stasis relative to conditions that existed 6-7 years ago.
Exhibit 1: Earthmover Usage Slowdown Reflects Stagnation in China’s Economy
Source: Komatsu, Author’s Analysis
Contractors are very unlikely to treat earthmovers as a speculative value store the way many Chinese entities have stockpiled copper and other base metals, for instance. Rather, bulldozers, excavators, and wheel loaders are depreciating assets whose prices decline the moment they leave dealership lots. The machines’ value comes from the work they can do, not because there is a futures contract in bulldozers.
This reality plus the enduring outsized importance of infrastructure and real estate to the Chinese economic model, suggests earthmover equipment sales shed a truer light on the state of China’s real economy than do “apparent consumption” number for copper and other commodities. I consider multiple commodities and lead indicators in my analysis, but earthmovers and how they are used in a very powerful bit in the analytical toolkit.
Here are some extra materials if you’re interested in how we’ve assessed and used earthmover data in the past.:
- Gabriel B. Collins and Andrew S. Erickson, “Digging In: Earthmover Sales Reflect Risks to China’s Economic Growth,” China SignPost™ (洞察中国) 52 (17 January 2012). http://www.chinasignpost.com/wp-content/uploads/2012/01/China-SignPost-52_Digging-in_Earthmover-sales-as-barometer-of-economic-conditions_201201171.pdf
- Cookson, Robert. “China: Digger Sales in the Ditch.” Financial Times, January 26, 2012. https://www.ft.com/content/00a6a878-8a09-32ac-8a0a-ee96f84f8f45.
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