- Chinese trade data missed across the board last month with imports, exports and trade balance all undershooting market expectations.
- The timing of Lunar New Year holidays was one factor behind the ugly result.
- Combining January and February’s figures together, both exports and imports fell from a year earlier.
- Trade tensions between the United States and China have thawed in recent months, helping to boost confidence that a trade deal, or truce, may be reached between the two nations.
China’s trade data missed across the board in February with imports, exports and trade balance all undershooting market expectations.
According to China’s General Administration of Customs, the value of exports tumbled 20.7% from a year earlier (all figures in US dollar terms), a performance in stark contrast to the performance of January when exports jumped by 9.1%.
Markets were looking for a smaller decline of 4.8% in February.
On the import side of the ledger, values fell by 5.2% from a year earlier, steeper than the 1.5% fall of January and below the 1.4% decline expected by economists.
The unusual movements between January and February, especially for exports, reflect the timing of Lunar New Year celebrations in China which shift year-to-year depending on the Lunar calendar.
This often creates wild swings in the data, as seen in the chart below.
To get a better read on China’s true trade performance, it’s often best to add the January and February figures together to mitigate the effect of Lunar New Year.
The news in 2019 was not great.
“Seasonality created a high base last year because of the shift of the Lunar New Year,” said Kevin Xie, Economist at the Commonwealth Bank.
Combining January and February data, the 4.4% annual decline in exports reported in December accelerated to 5% in the first two months of the year. Imports contracted 3% over the same period compared to the same period a year earlier.
Like the export and import movements in February, the timing of Lunar New Year also impacted the size of China’s trade surplus which plunged to $4.12 billion, down from $39.16 billion in January and well below the $26.4 billion surplus expected.
Xie says he expects that China’s external performance will remain weak for some time yet.
“The outlook for Chinese exports remains soft because of the global economic slowdown,” he said.
“We expect import growth to remain weak until the announced fiscal stimulus flows through the real economy later 2019.”
Another factor that could influence China’s medium and longer-term trade performance is a potential resolution of trade tensions with the United States.
After tit-for-tat tariffs were introduced on the others exports in 2018, tensions between the two nations have thawed in recent months, helping to boost confidence that a trade deal may be in the offing.
A scheduled increase in US tariffs on Chinese imports entering the country earlier this month was postponed amidst progress in trade negotiations.
US President Donald Trump and Chinese President Xi Jinping are also expected to meet in person later this month, potentially to sign off an agreement should one be reached.