China’s July trade growth numbers are out, and they crushed expectations.
Exports jumped 5.1% year-over-year, which was much stronger than the 2.0% expected by economists.
Imports surged 10.9%, blowing away expectations for 1.0% growth.
Assuming they’re true, the numbers are definitely welcome consider all of the scares of an economic hard landing amid evidence of a major slowdown.
Unfortunately, economists have been quick to raise doubts about the number.
“One important question in investors’ mind is whether we can trust the quality of these trade statistics because they were significantly manipulated between October 2012 and April 2013,” noted Bank of America Merrill Lynch’s Ting Lu. “As RMB/USD stopped appreciating, hot money started flowing out and the government took severe measures to crack down on fake trade after April, we believe the quality of trade data was improved a lot.”
Lu actually has a proprietary method that accounts for the potential trade data manipulations, and on the bright side, his adjusted numbers were still encouraging.
“Using our adjustment method for fake trade (developed in May), adjusted export growth in July rose to 3.5% yoy from -4.3% in June and adjusted import growth rose to 10.3% yoy from -1.2% in June,” he said.
So even though some might think the officials numbers were massaged, the numbers were probably directionally correct at the least.
“Together with the rebounding official PMI to 50.3 in July from 50.1 in June, July trade data are supportive of a better economic outlook for China and will surely help boost market confidence,” said Lu. “We are happy to maintain our above-consensus prediction of 7.5% yoy GDP growth for 2H13 and a sequential recovery to 1.9% QoQ in 2H from 1.7% in 2Q.”
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