Investors cheered earlier this month when it emerged Chinese exports rose for the first time in 14 months last December (and by 17.7 per cent year on year no less).
Unfortunately for the bulls, Standard Chartered’s Stephen Green on Wednesday poured cold water over the notion that the figures confirm a global recovery is under way.
Green noted, for example, that while the headline export growth number was indeed impressively high, the seasonally adjusted value of both processed and non-processed exports through to the end of the year was not. At best, he says, it could be described as having ‘ground up’.
As he argued (our emphasis):
The stellar year-on-year growth rate was rather due to the collapse in China’s exports starting in November-December 2008, which caused the y/y rate to spike up.
Late orders perhaps helped an otherwise poor set of numbers, rather than signalling a sudden improvement. In other words, overseas retailers (especially in the US) scrambled to catch up with better-than-expected autumn sales and faster-than-expected declines in inventories – which is an important bit of good news. But we believe the data is a sign of unfulfilled expectations that things would get worse, rather than a sign that things have suddenly gotten better.
Which according to Green means we’re only about half way there in terms of full recovery:
Based on the seasonally adjusted numbers, the gradual recovery of 2009 brought China’s exports halfway back to their previous peak. From peak to trough, China’s exports fell by 35%. By December 2009, they had recovered by 26%, but we have another 21% to climb from the December level before we match the previous peak. (In non-seasonally-adjusted terms, it was almost reached in December 2009, but the monthly effects are misleading.)
Here meanwhile is that trajectory in chart form:
The above, however, probably won’t be what catches the attention of markets in the months to come:
We do not make these points in order to make forecasts for 2010. The world has changed, and growth in the G3 is very much stimulus-led, so no one can be sure how China’s exports will evolve. Instead, our point is that the year-on-year numbers will look extremely good, which will add to confidence, even if the month-on-month rate of export growth is much lower than before the crisis.
Related links:
What really drove Chinese commodity imports? – FT Alphaville
China property bubble: Real or imaginary? – FT Alphaville
Borrowed in China - FT Alphaville