Janus Henderson: Chinese data flattered by New Year timing effect

New Year fell on 5 February this year, 11 days earlier than in 2018. Exporters front-load shipments ahead of the holiday. When New Year is in early February (or late January), this bulge shows up in January exports. When the holiday occurs later, as in 2018, the February number benefits.

This effect is likely to explain the recovery in the year-on-year change in exports in US dollars from -4.4% in December to 9.1% in January. The February figure may fall sharply as high exports a year before drop out of the annual comparison – year-on-year export growth surged to 43.6% in February 2018.

This suggestion is supported by a comparison with two pairs of years with similar New Year timings  - 2010 / 11 and 2007 / 08. The first chart superimposes year-on-year changes in exports in those years on recent data. In both cases, a rise in growth in January of the second year was more than reversed in February.

The earlier New Year may also have contributed to a rise in year-on-year narrow money growth – as measured by true M1 including household demand deposits – from 3.4% in December to 5.1% in January. Demand for transactions money increases ahead of the holiday, with the effect showing up in end-January monetary data when the New Year occurs in early February. Money growth, like export growth, fell between January and February in 2011 and 2008.

Money and credit trends may be starting to revive in response to policy easing but a significant recovery in economic data is unlikely before late 2019, judging from the lead time at previous turning points in 2008, 2011 and 2015 – second chart.