Daily Insight
Group Economics Macro & Financial Markets Research
8 March 2016
China’s trade data weak, although distorted Arjen van Dijkhuizen Senior Economist Tel: +31 20 628 8052
Chinese trade data illustrative for weakness in domestic and global demand
However, numbers should be interpreted with care given various distortions
Fed policymakers continue to show uncertainty before March’s FOMC
arjen.van.dijkhuizen@nl.abnamro.com Maritza Cabezas
meetings
We expect the Fed to remain on hold in the coming year
Senior Economist Tel: +31 20 343 5618 maritza.cabezas@nl.abnamro.com
Contraction of China’s merchandise exports deepened in February … China’s trade data for February showed ongoing weakness, although the numbers are distorted and should be interpreted with care. In USD terms, merchandise exports fell by 25.4% yoy in February (January: -11.4%), while markets had expected a drop of only 14.5%. The weakness was broad-based, with exports to both the US and the EU tumbling by 20-25%. Still, China’s trade data at the start of the calendar year are typically affected by the timing of the Lunar New Year break. In February 2015, export growth was remarkably strong (48.3% yoy), as a significant part of the disruption from the New Year break was pushed into March 2015. In 2016, the break was earlier in February, so the downward impact on the February number was stronger. Furthermore, lower export prices also might have played a role. However, even taking these distortions into account, the ongoing weak export performance is also illustrative for the weakness in global demand, which seems to have had a stronger impact than the real effective appreciation of the yuan over the past years. … while the decline in merchandise imports eased somewhat Meanwhile, the decline in China’s merchandise imports fell to 13.8% yoy in February (January: -18.6%), a bit more than markets had expected (-12%). Imports data are distorted too, reflecting special factors such as the timing of the Lunar New Year, the effects of strategic buying in December, and the curtailment of overinvoicing practices set up to hide capital outflows. Moreover, while the import numbers partly reflect the weakness of domestic demand, particularly in the areas of industry and investment, they are still largely shaped by the sharp drop in import prices, particularly commodity prices. Estimated import volumes show signs of bottoming out in late 2015, although the latest estimate is for December 2015. Given all kinds of distortions, drawing too strong conclusions is inappropriate Whereas we were not overly optimistic regarding the bottoming out of imports and exports in December 2015, we are not overly pessimistic now either. Drawing too strong conclusions on the January and February trade data is not appropriate, given the distortions surrounding the
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2
Daily Insight – China targets 6.5-7% growth in 2016- 8 March 2016
Lunar New Year break and other special factors. Trade data for the coming months should provide a clearer picture.
Estimated import volumes show early signs of bottoming % yoy
60
30
0
-30 12
13 Import values
14
15
16
Estimated import volumes
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
Fed policymakers continue to show uncertainty before March’s FOMC meeting In the past few days Fed policymakers have had a cautious tone, but also divergence in views regarding the outlook. The Fed will hold its next FOMC meeting in 15-16 March. We think that the Fed will not hike in this meeting and will likely remain on hold in the coming months. Fed Vice Chair Fischer slightly optimistic on inflation, but cautious on growth In a speech held in Washington on Monday, Chair Stanley Fischer discussed among other topics inflation, productivity and the effectiveness of monetary policy at the zero lower bound. On inflation he mentioned that “we may be well at present seeing the first stirrings of an increase in the inflation rate - something that we would like to happen”. He supports the view that the link between inflation and unemployment - although weaker - still exists. This came alongside more cautious remarks on productivity, a major determinant of long-term growth. He mentioned that ‘at this stage we simply do not know what will happen with productivity’. As for monetary policy he defended the effectiveness of quantitative easing and negative rates as instruments to expand monetary policy. Brainard cites downside risks and calls for prudent hikes Another FOMC policymaker Lael Brainard, considered a dove, mentioned that the US economy was not immune to foreign developments, given the impact of the weak and decelerating foreign demand and the drag of energy related activities. She raised concerns regarding the low level of market based inflation compensation. She called for careful adjustment of monetary policies to preserve the expansion.
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Daily Insight – China targets 6.5-7% growth in 2016- 8 March 2016
Day
Date
Time
Country
Monday Monday Monday
07/03/2016 07/03/2016 07/03/2016
08:00:00 09:00:00 21:00:00
DE CH US
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
08/03/2016 08/03/2016 08/03/2016 08/03/2016 08/03/2016 08/03/2016
00:50:00 08:00:00 11:00:00 12:00:00
Wednesday Wednesday
09/03/2016 09/03/2016
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Manufacturing orders - % mom Foreign currency reserves - CHF mln Fed Reserve consumer credit - USD bn
Jan Feb Jan
-0.1 571.1b 10.5
-0.2
0.0
15.3
JP DE EC US CN CN
GDP - % qoq Industrial production - % mom GDP - % qoq NFIB small business optimismem - index Exports - % yoy Imports - % yoy
4Q F Jan 4Q P Feb Feb Feb
-0.3 3.3 0.3 92.9 -25.4 -13.8
-0.4 1.4 0.3 94.2 -14.5 -10.1
0.3 94.0
16:00:00
CA NZ
Policy rate - % Policy rate - %
Mar 9 Mar 10
0.5 2.5
0.5 2.5
0.5 2.5
10/03/2016 10/03/2016 10/03/2016 10/03/2016 10/03/2016 10/03/2017 10/03/2016 10/03/2016 10/03/2016 10/03/2016 10/03/2016
02:30:00 02:30:00 06:30:00 13:45:00 13:45:00 14:30:00 14:30:00 15/03/2016 15/03/2016 15/03/2016
CN CN NL EC EC EC US CN CN CN KR
CPI - % yoy PPI - % yoy CPI - % yoy ECB Deposit rate - % ECB Refi Rate - % ECB Press Conference Initial jobless claims M2 money growth - % yoy New loans - CNY bn Aggregate financing - CNY bn Policy rate - %
Feb Feb Feb Mar 10 Mar 10
1.8 -5.3 0.6 -0.3 0.05
1.9 -4.9 -0.4 0.05
0.6 -0.5 0.05
Feb Feb Feb Mar 10
278.0 14.0 2510 3417 1.5
275.0 13.7 1200 1780 1.5
1.5
11/03/2016 11/03/2016 11/03/2016
08:00:00 10:30:00
DE GB PL
CPI - % yoy Trade balance - GDP mln Reference rate - %
Feb F Jan Mar 11
0.0 -2709 1.5
1.5
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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