Chinese trade for January underwhelms, economists wary of drawing conclusions

The latest data on China's international trade, for the month of January, made for grim reading, but some economists cautioned the data had likely been distorted by the impact of the Lunar New Year holidays and other atypical factors.

Chinese exports and imports weakened substantially in January, with exports 11.2% weaker year-on-year in US dollar terms (consensus: -1.8%) and imports off by 18.8% (consensus: -3.6%).

"It is arguably too early to jump to conclusions and we’ll have to wait until we get the February data and can iron out
some of the seasonal volatility before we can get a clearer idea of how trade is performing," Capital Economics's Julian Evans-Pritchard wrote in a research note sent to clients on Monday morning.

Nevertheless, Evans-Pritchard admitted he had expected the export and import data to reveal a stronger underlying picture, continuing with the trend seen since the beginning of 2015, as the economic situation in China's main trading partners continued to improve and as a result of the policy stimulus applied in Asia's largest economy.

The earlier timing for the Lunar New Year Holidays this year might also have been expected to draw exports into January, he said.

With the opposite effect, the lower rate of growth in exports last month may also have been the result of the narrower gap in the on-shore and offshore yuan rates in January versus December, which boosted exports in December.

To take note of, price effects also appeared to have dampened the rate of growth in imports, as demand for the major industrial commodities in volume terms appeared to be "relatively strong".