Driving Through the Data Fog in Asia
March 9, 2014 Leave a comment
Mar 5, 2014
Driving Through the Data Fog
Michael S. Arnold
Economic data are by nature imprecise: Witness how often the initial readings need to be revised, in some cases significantly.
But a confluence of factors early this year is making it particularly difficult to gauge the state of Asia’s economies. One key question is whether or not the region is seeing a long-promised export bounce from the recovery in developed economies.
Ordinarily that would be fairly straightforward to assess – look at trade data for China and other key Asian exporters, import data for the United States, manufacturing purchasing managers indexes, inventory levels and the like.
The problem is that data this time of year are always distorted by the Lunar New Year holiday observed in China and much of Asia, which can close factories for up to two weeks. Additionally, the timing of the holiday – which sometimes falls in January, sometimes in February and this year falls across both months – makes straight annual or monthly comparisons troublesome.
On top of that, a particularly harsh winter in the United States has added a fresh layer of confusion. If exports to the U.S. are slower than normal, does it reflect an underlying shift in the patterns of trade, with consequences for Asian policy? Or are shipments merely delayed because of blizzards?
There also are questions about the reliability of the data. When China’s exports jumped by more than 10% in January — far beyond expectations – many analysts saw it not as a sign of a trade revival but as evidence of over-invoicing by companies trying to circumvent Beijing’s strict capital controls and move money into the country.
“With noise-to-signal ratios elevated” right now, JP Morgan said in a research report over the weekend, “it is hard to track trends in final demand.”
Bank of Singapore chief economist Richard Jerram noted recently that Asian economies finally seem to be seeing the long-awaited export bounce. PMIs for the region’s Newly Industrialized Economies (NIEs), including tech bellwethers South Korea and Taiwan, had risen steadily since July to their strongest level in almost three years.
Until this week, that is: Data Monday showed PMIs for both South Korea and Taiwan declined in February, casting doubt on the recovery thesis.
Was it the Lunar New Year? The American winter? Or just a normal blip?
Some analysts say the best solution is to average the figures for January and February to minimize the holiday distortion. BarclaysBARC.LN -0.28%
Capital suggests looking at six-month, seasonally adjusted figures to get a broader sense of the trend.
Don’t tell that to Frederic Neumann, co-head of Asian economic research at HSBC.
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