Key takeaways
- Komatsu’s monthly use-hour data for earthmovers in China strongly suggest economic stasis relative to conditions that existed 6-7 years ago.
- Earthmover sales and usage offer a measure of China’s real economic activity that is not easily manipulated for political reasons.
- Contractors are very unlikely to hoard bulldozers, excavators, and wheel loaders as speculative stores of value, because these machines are depreciating assets valued for their work.
- Given infrastructure and real estate’s outsized role in China’s economic model, earthmover data may show the real economy more truly than apparent copper consumption.
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.
Frequently asked questions
What does earthmover usage say about China’s economy?
Earthmover usage in China points to economic stagnation. Gabriel Collins finds that Komatsu’s data on monthly machine use hours strongly suggest stasis relative to conditions 6-7 years ago. Because infrastructure and real estate remain outsized drivers of China’s economic model, how hard construction machines are working is a useful read on real activity.
Why use earthmover data instead of official Chinese statistics?
Earthmover data are harder to manipulate for political reasons than many official figures. Assessing China’s economy requires indicators that reflect real activity, and machine use hours reported by Komatsu come from equipment doing actual work on infrastructure and real estate projects, sectors that carry outsized weight in China’s economy.
Is earthmover data better than copper consumption as a China indicator?
Collins argues earthmover sales shed a truer light on China’s real economy than apparent copper consumption. Many Chinese entities have stockpiled copper and other base metals as speculative value stores, which distorts demand signals. Earthmovers lose value once they leave dealer lots and have no futures market, so purchases and use reflect real work.
What is Komatsu KOMTRAX data?
KOMTRAX is the source of Komatsu’s reported monthly operation hours for its machines in China, shown in the article’s chart. Collins uses these use-hour figures as a lead indicator of construction and economic activity, alongside multiple other commodities and indicators, and has applied earthmover data to China analysis since at least 2012.
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