China Exports Sank 17% Amid Virus Lockdown, Delayed Data Shows

Early last month, China spooked markets when Beijing said January’s trade data would be delayed until March, and rolled up with February’s numbers.

Although it’s the first time the January figures haven’t been broken out separately, the news wasn’t actually all that surprising. China aggregates some activity data for the two months in order to help iron out any “wrinkles” (so to speak) from the Lunar New Year holiday, and the COVID-19 debacle introduced considerable uncertainty.

But under the circumstances (i.e., with the coronavirus spreading rapidly and Chinese mainland markets struggling to recover from a grievous post-holiday swoon), traders took it as a bad omen.

Obviously, the market is on tenterhooks when it comes to economic data out of the world’s second largest economy, which is still hobbled by shut-ins and various lockdowns associated with the sweeping virus containment effort.

On Saturday, China released the January-February trade numbers.

Suffice to say parsing these on the fly near midnight in the US is mission impossible, so for now, I’ll just give you the numbers.

Exports plunged 17.2% for the two-month period, more than expected, but given how much ambiguity there is around this situation, that print is pretty close to consensus, which was looking for a 16.2% drop.

Imports, meanwhile, shrank just 4% in dollar terms, far less than the 16.1% contraction the market expected.

This comes on the heels of the worst PMIs on record, a near total collapse in auto sales and amid rampant speculation about what’s next for China’s economy as the country attempts to recover from an epidemic which, if you believe the official data, is slowly abating.

Nomura’s Ting Lu this week updated his base case for the Chinese economy to account for the evolution of the virus and the pace at which the country is getting back to work (or trying to, anyway).

“With the slower-than-expected rate of business resumption, we now cut our Q1 y-o-y GDP growth forecast to 0.0% from 3.0%”, he wrote. I’ll leave you with a brief outline of the bank’s new scenario analysis:

Accordingly, we cut our sequential growth forecast to -4.4% q-o-q in Q1 from -1.5%. We also cut our annual GDP growth forecast in 2020 to 5.0% from 5.5% (vs 6.1% in 2019). These forecasts are also estimates from our new baseline scenario under which we assume lockdown measures end in late March. Under the “bad” scenario in which we assume China faces a moderate second wave of infections, lockdown of Hubei and perhaps some other regions lasts until end-April, Q1 GDP growth could slump to -1.0% y-o-y. There could be a recovery after April, but Q2 growth would likely be a modest 4.6% y-o-y. Under the “severe” scenario in which we assume lockdown of all Hubei and some other regions lasts until end-June and COVID-19 becomes an epidemic in most major economies, including the US, China’s year-on-year growth plummets to -1.5% in Q1 and remains low at 2.0% in Q2.