What do you get when you combine pent-up demand abroad, a maturing domestic recovery, and base effects from a catastrophe?
If you’re looking at Chinese trade data, you get a 155% YoY jump in exports in February, or nearly 61% for January and February combined.
The charts will never be the same. Henceforth, we’ll have to adjust the y-axis or else circle the spike in red and mark it “COVID distortions.”
That’s difficult to parse, but it gets easier when you compare the January-February period’s 61% YoY spike with analyst estimates for a 40% jump. Obviously, those estimates factored in the distortions and, one assumes, the seasonal volatility created by the Lunar New Year holiday. You can see the comp clearly in the visual (i.e., the dramatic spike lower in the blue line during the Hubei lockdown and extended holiday last year). In yuan terms, the surge in exports over the first two months of the year was nearly double consensus estimates.
“Production and consumption of major economies such as Europe and the United States has rebounded, and the increase in external demand has driven China’s export growth,” the customs agency said. “Since the beginning of this year, the economies of Europe and the United States, especially the manufacturing industry, has rebounded significantly, and manufacturing PMIs [there] remained high,” the official release added. Beijing also cited fiscal stimulus in the US.
As a reminder, PMIs stateside are indeed blistering. Scorching-hot reads betray rising price pressures and supply chain bottlenecks. Much to the chagrin of those inclined to fault China (in one way or another) for the pandemic, the country has benefited from global demand for medical supplies and products tied to the proliferation of work-from-home arrangements.
Commenting on the distortions and base effects, China’s customs agency said that while “the low base is also one of the reasons for the larger increase this year, even compared with normal years, such as the same period in 2018 and 2019, the country’s import and export growth rate is about 20%.” “It’s still quite solid,” Nomura remarked, in a note.
China appeared to engage in a bit of sandbagging at the National People’s Congress. Beijing is targeting growth of more than 6% for 2021, but analysts are looking for output to increase by at least 8%.
“The cautious cyclical stance likely reflects policymakers’ ongoing wariness of the lingering uncertainty from the pandemic,” SocGen’s Wei Yao and Michelle Lam wrote, adding that “they are also probably keen to leave some room for deleveraging and structural changes, given their clear desire to defuse debt risk and speed up the ambitious reform agenda laid out in the 14th five-year plan.”
Beijing painted a relatively rosy picture while discussing the trade data. “The domestic economy continued to recover steadily, driving rapid growth in imports,” customs went on to say. “Market demand is expected to rebound further, and companies are more optimistic about the future.”
China was the only major country able to boast of economic growth in 2020.