Market Fell on China’s Dissapointing Data – Economic Highlights

We shouldn’t put too much stock in any one economic data point coming out of China, particularly the export numbers given how exposed the country’s export account is to over- and under-invoicing by exporters. This manipulation of the export numbers, which was reportedly a big deal in the year-earlier period, is a direct result of the non-convertibility of the Chinese currency. Then there is the issue of Lunar Year, which always tends to have a distorting effect on data.

But beyond all of this, an -18.1% drop in Chinese exports would imply a sharp drop off in demand for the country’s products elsewhere. But we know that’s not the case as the economic outlook for the U.S., European, and even Japanese economies has been fairly stable. Bottom line, there are legitimate questions about China’s growth outlook that have been around for quite some time. Other recent economic indicators like inflation, purchasing managers’ surveys and industrial production data have also been pointing towards some loss of momentum, but not to the extent implied by the export shortfall.

The market came back really strong from the January sell-off, with the broad market indexes essentially at record levels. But stocks don’t go straight up all the time and the current lack of a directional thrust in a low-news backdrop is hardly unusual. With not much on the data docket over the coming days, we shouldn’t expect much from the market either.