Earlier this weekend, China reported its September trade data. Imports returned to growth and export growth accelerated 9.9 per cent, which was more than the 5.5 per cent growth economists had expected.However, it’s too early to get excited growth picking up in China.
Bank of America Merrill Lynch economist Ting Lu notes there were three “irregularities” that boosted the numbers.
From Lu’s latest note:
The question for us is to make sure whether the jump in export growth is a one-time blip due to some irregularities or it truly trends up. After reviewing all relevant factors, we remain cautious, though we think markets could relieve a bit that China’s exports could still hold up well when euro zone is in recession. In our view, the recent appreciation of euro-USD boosted yoy export growth by about 2%. And the fact that the mid-Autumn Festival was in the middle of Sep in 2011 but was part of the Golden Week in 2012 might also distort the data. In fact, the big rebound of export growth in Sep in Korea, Taiwan and China could all be affected by the different timing of mid-Autumn festival to some extent. Finally, base effect could play a big role as in 2011 export growth slumped to 17.0% yoy in Sep from 24.4% in Aug. Looking forward, demand of China’s major markets will likely remain work or even get weaker in yoy terms, while leading indicators like processing imports still point to low single digit export growth, so we conservatively expect export growth to moderate again (but remain positive) in coming months.
These details won’t quell fears that China’s slowing economy is heading for a hard landing.
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