By Rudi Filapek-Vandyck

It is a question that has almost become fashionable to ask: are Chinese economic data reliable enough to be relied upon? Some commentators in Australia, for example, have asked the question with regards to last week's release of June manufacturing PMI surveys with the HSBC/Markit survey showing an outcome that was only positive by a very small margin.

What these commentators missed is that the HSBC/Markit survey is an independent survey, and yes, it is not unusual for both PMI surveys -official and independent- to differ in outcome. But this year the independent survey has been the weaker one of the two.

This runs contrary to suggestions it might be in the Chinese government's interest to now understate the pace of growth for the Chinese economy.

Also, it has been argued by China-watchers inside the country that a lot of effort has been spent to improve financial and economic reporting by Chinese authorities. Assuming China's intentions are genuine (and many economists seem to believe this is the case) an argument can be made that today's economic data are likely closer to reality than has been the case in the years past.

Having said all of the above, I note that China's official estimate for GDP growth in 2009 was upgraded this week to 9.1% from 8.7% previously; more than six months after we moved into 2010, and some five months after the previous estimate was released.

But what about data from the US? How come economists and market commentators seldom ask questions regarding the integrity of data released under the supervision of the Obama administration? After all, it's not like the ruling administration, plagued by adverse lobbying from drug producers and Wall Street banks and by an ever so problematic oil spill in the Gulf of Mexico, cannot do with some good news on the domestic front?

US based trader and publisher of his own daily newsletter, Dennis Gartman yesterday made a mockery out of Friday's release of US labour market data. I think his comments very much make sense. Investors better pay attention.

To refresh everyone's memory, Friday's release of non-farm payrolls once again disappointed, but the overall unemployment rate provided some offset with unemployment falling to 9.5% from 9.7%, to everyone's surprise.

Here's what Gartman had to say about: “[] how is it possible for 625 thousand people to have suddenly dropped from the labor pool? This number seems utterly impossible and we cannot help but feel that the Obama Administration has done what it can to “fudge” the data to the best of its ability, although we are told, have been told and will be told in the future that such “fudging” is impossible.

“But consider for a moment that with the 320 thousand+ that dropped from the labour pool in May and the 625 thousand that dropped from the pool in June we’ve had nearly 1.0 million… a staggering sum never matched before in history… apparently voluntarily taking themselves out of the work force, and thus allowing the unemployment rate to fall by several tenths of a percent! Indeed, doing the math the other way, had these nearly 1.0 million people not dropped from the labour pool but had instead remained in it, the unemployment rate would be at least 9.9% and might have edged its way past 10.0%... but that would be political suicide with the elections looming more and more upon the horizon.

“So, 1.0 million people are said to have left the pool; the unemployment rate fell and there’s no way the data was “fudged.” Yeah, right!”

I think the maths and commentary speak for themselves.

Note also that Gartman has even more bad news, taken from the same labour market update on Friday:

Gartman: “[] the average hourly work week fell from 34.2 hours to 34.1, and this is the equivalent of several tens of thousands of workers having been laid-off, but instead of being made redundant, the world week for each worker was cut.

“Worse even still, working less hours, the average workers is also being paid less for each hour worked… not materially in each case of course, but by pennies/hour collectively. Across the millions upon millions of people that are employed, 0.1 fewer hours worked and earning 2 cents/hour less adds up a huge sum of money lost by consumers.”

I think that most of you will agree with me that Gartman's conclusion says it all: “We would very much like to spin this data positively, but we cannot.”

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