China: Better than expected trade data could be distorted – ABN AMRO

According to Arjen van Dijkhuizen, senior economist at ABN AMRO, China’s latest trade data came has come in better than expected, but after remaining solid during January-October 2018, trade data started weakening since November, and poor December data added to fears of a global slowdown.

Key Quotes

“One should not attribute the drop in Chinese imports fully to the slowing of domestic demand. Various special factors are at play: the slowing of exports (as a big chunk of Chinese imports is export-related), the effect of import tariffs implemented last year, payback from trade conflict related frontloading, lower commodity prices and base effects from strong trade numbers end 2017.”

“Meanwhile, the January trade data came in much better than expected. Import growth remained negative (-1.5% yoy), but much less than expected (-10.2% yoy) and in comparison to December (-7.6%). On a mom basis, imports rose by 8.7% in January.”

“Meanwhile, export growth was in positive territory again (+9.1% yoy, versus consensus -3.3% and December -4.4%), taking away some of the fears of a sharp slowdown in external demand. That said, China’s monthly trade data are notoriously volatile, particularly at the start of the year reflecting to year-to-year changes in the timing of China’s New Year holiday break. That means that one should be careful in drawing sharp conclusions from monthly trade figures.”