Chinese trade and inflation data
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Chinese Lunar New Year complicates figures out of China.
Chinese trade: The Chinese trade balance swung from a surplus of US$31.86 billion in January to a deficit of US$22.98 billion in February. The result is distorted by the timing of Lunar New Year holidays.
- Tame Chinese inflation: Producer prices fell by 2.0 per cent in the year to February (median forecast was for 1.9 per cent decline). Consumer prices rose by 2.0 per cent over the year – the slowest growth in 13 months (median forecast 2.0 per cent).
- Seasonal increase in food prices: In February, consumer prices rose by 0.5 per cent after a 1 per cent rise in January (biggest rise in 11 months). Food prices rose 1.7 per cent, affected by Lunar New Year holiday celebrations while non-food prices were unchanged.
What does it all mean?
- Is the Chinese economy expanding or contracting? It’s a bit like the US. In China it is the timing of Lunar New Year holidays that complicates analysis. In the US it is the recent batch of harsh winter weather. But given the softness of inflation data it does appear that the Chinese economy has slowed in recent months, probably expanding in a 7.0-7.5 per cent annual pace, down from 7.5-8.0 per cent. The full extent of the slowdown won’t be known for a few months. But it appears a mid cycle pause is occurring as authorities attempt to deal with the effects of the shadow banking system and the pollution problem.
- But it is important not to read too much into the latest Chinese economic data. Lunar New Year occurred on January 31 so economic activity was pushed into January and potentially March as Chinese businesses shut down for the holidays in February. More details on the Chinese economy will be revealed on Thursday with retail spending, investment and production data for January & February to be released.
What do the figures show?
Chinese trade data
- China’s trade balance swung from a surplus of US$31.86 billion in January to a deficit of US$22.98 billion in February. Exports were down by 18.1 per cent over the year compared with a rise of 10.6 per cent in January while imports were up by 10.1 per cent after a rise of 10 per cent in January. Results are distorted by the timing of Lunar New Year holidays.
- Economists had tipped a 6.8 per cent lift in exports, 8 per cent rise in imports and trade surplus of $14.5 billion in February.
- Quoting customs administration data, Reuters reported that China’s crude oil imports in the first two months of the year rose 11.5 per cent from a year earlier, while imports of copper jumped 41.2 per cent and iron ore shipments rose 21.8 per cent.
Chinese inflation data
- The annual rate of consumer price inflation eased from 2.5 per cent to a 13-month low of 2.0 per cent in February, in line with forecasts. Over the month consumer prices rose by 0.5 per cent, below forecasts for a 0.8 per cent lift in prices.
- Food prices rose by 1.7 per cent in February after a 2.4 per cent lift in in January (affected by Lunar New Year holiday celebrations) with non-food prices unchanged. Over the year to February, food prices rose by 2.7 per cent while non-food prices were up by 1.6 per cent.
- Food: Prices of fresh vegetables rose by 8.2 per cent in February with fruit up 8.0 per cent. Meat & poultry prices fell 1.0 per cent with pork down 3.2 per cent (reflects higher pig numbers), beef rose by 1.3 per cent and lamb rose by 0.9 per cent.
- Other prices: Clothing prices fell 0.5 per cent in February; tobacco & liquor prices were flat; transport & communications fell 0.1 per cent; household equipment & maintenance prices were flat; healthcare & personal products rose by 0.2 per cent; entertainment & educational fell by 0.5 per cent (travel down 3.7 per cent); living costs (including rents, utilities) rose by 0.3 per cent.
- Producer prices (business inflation) fell by 0.2 per cent in February after a 0.1 per cent fall in January. Producer prices in February were 2.0 per cent lower than a year ago, the biggest annual decline in seven months. Economists had tipped a 1.9 per cent annual decline.
- Mining producer prices fell by 0.9 per cent in February to be down 5.3 per cent over the year. Raw material prices fell 0.5 per cent in February (down 3.2 per cent annual); machined goods fell 0.2 per cent (down 2.0 per cent annual). Over the year prices fell most in coal mining (down 10.2 per cent) but rose most in gas production (up 5.2 per cent).
- China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
- The latest Chinese economic data will put downward pressure on commodity prices and the Aussie dollar while ensuring that interest rates are left stable for another few months. Traders and investors shouldn’t get too carried away given that activity data is released on Thursday. But if it is confirmed that the Chinese economy is slowing a little too much, authorities will be more confident to stimulate growth, especially with low inflation.
What is the importance of the economic data?
- China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
What are the implications for interest rates and investors?
- The latest Chinese economic data will put downward pressure on commodity prices and the Aussie dollar while ensuring that interest rates are left stable for another few months. Traders and investors shouldn’t get too carried away given that activity data is released on Thursday. But if it is confirmed that the Chinese economy is slowing a little too much, authorities will be more confident to stimulate growth, especially with low inflation.