Photo: Courtesy of Zack Buckley
Earlier today, China released its November trade data, and the numbers were much weaker than expected. This came only a day after China announced stronger-than-expected retail sales and industrial production numbers.Some people took to Twitter to say that the strong numbers may have been massaged by the Chinese government, whereas the trade data revealed true cracks in the economy as the numbers are more difficult to manipulate since they must tie out with China’s trading partners’ data.
However, there may be a reasonable explanation for the unexpectedly weak trade data. Bank of America Merrill Lynch’s Ting Lu wrote in a note to clients:
Why export growth dropped so much in Nov?
We believe the big volatility in export growth since Sep 2012 could be driven by a bunch of factors such as working days and base effects, but we would like to highlight that strikes in the ports of Los Angeles and Long Beach in California from 27 Nov to 4 Dec could play a role as these two ports handle 40% of American imports (surely much more of imports from Asia). Note China’s export growth to the US slumped to -2.6% yoy in Nov from 9.0% in Oct. In anticipation of strikes in Nov, US importers might have frontloaded some imports in Sep and Oct, thus making US imports from China even more volatile. Exports to EU turned even worse, contracting 18.0% in Nov after falling 8.1% yoy in Oct. However, we expect this sharp drop is temporary and could be reversed in coming months on alleviated fear of eurozone breakup.
Hopefully, the new agreement between labour and management means there will be less volatility moving forward.
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