Taoyuan Nights

Sorry, I’m not updating so often these days. Some random economic nuggets relating to Taiwan:

Typhoon Morakot: hundreds dead + US$2-3 bn of damage.

Unemployment: “Unemployment in Taiwan has reached record levels for the third month running, according to the latest unemployment figures.”

http://news.bbc.co.uk/1/hi/business/8217907.stm

Wages: Scott Sommers pointed to this – real wages in Taiwan are now at 1996 levels:

http://www.taipeitimes.com/News/taiwan/archives/2009/08/26/2003452008

GDP: very strange stuff being put out. People are swapping between different methods of measurement and projection to try and make things look good:

“Gross domestic product fell 7.5 percent in the June quarter from a year earlier, in line with expectations and improving from a record 10.1 percent contraction in the previous quarter as the steep drop in exports eased.”

So that looks like a drop to me, and one that is bigger than the ‘0 to 4%’ annual drop that the government has talked about previously. But:

“In a further sign of a gradual recovery seen in most of Asia, gross domestic product rose 20.69 percent in the April-June period on a seasonally adjusted, annualised basis, the government said in its first release of such a series on Thursday.”

So the GDP is down from last year… but if you adjust the numbers a bit, and assume that the rest of the year behaves identically to the last 3 months, … then you get almost a 21% rise in GDP taking place? Well… that’s possibly technically true, but what if the current 3 months isn’t a great prediction of what’s to come? Then, the government’s prediction would be like walking along a dirty street somewhere, finding a $100 dollar note on the ground, deciding that this is the equivalent of finding a $1000 dollar note in a rich neighbourhood, and then assuming you’re going to keep finding dropped currency as you walk along the rest of the street, and calculating how rich you’ll be by the time you get home. Maybe you will find those notes; maybe you won’t.

One thing is for sure – extrapolating adjusted short-term data in the present economic environment over the long term is asking for trouble.

http://www.reuters.com/article/marketsNews/idUSTP9379020090820

Three simple questions to ask yourself:

1. Why would anyone with any training in statistics be making predictions about the future with 4 significant figures of accuracy (20.69% vs. 20.7% or 21% or 20% or “10-30″%)? The answer is: people conflate ‘precision’ with ‘accuracy’; but they’re not the same at all. The unexpected costs of Morakot alone account for 0.3% damage to GDP on a quarterly basis.

2. Did any of the people who are currently predicting a recovery, warn you of the downturn? And if they didn’t make that important prediction right… why would you listen to them now?

3. Did these people make unfavourable seasonal adjustments to the worst figures earlier in the year, and multiply them out four times as well? (as they did here). If not, why not? Why did they change their method?

Government economics is simply political marketing, and only a fool would take it seriously.

p.s. Yet more government spending described as ‘boosting GDP’, below. Does the writer realise that this is their future taxes and debt? Their children’s economic future being spent today? Besides, it isn’t economic growth when you have a bunch of stuff destroyed and then have to rebuild it. Otherwise, we would be paying kids to go round setting factories on fire, to stimulate the economy.

“The economy is expected to grow 3.92 percent next year, it said, with reconstruction from Typhoon Morakot, which triggered the island’s worst floods in about 50 years, likely to boost government spending.”

p.p.s. I really miss Din Tai Fung.