2 technical factors that could have exaggerated China's weak September exports

Exports contracted by 0.3% y-o-y.

According to Barclays Research, Chinese exports actually did not do that poorly after accounting for base and holiday effects.

Here's more from Barclays:

China’s September exports contracted by 0.3% y/y, against consensus forecast of a 5.5% gain (Barclays: 5%) and compared to the 6% average growth in July-August.

We think the decline is likely exaggerated by two technical factors. First, a high base from the dubious trade reporting that started last June.

We estimate that fake reporting may have boosted export growth by 2.6 percent points in September 2012*.

Second, there were two fewer working days this September versus last year in three of China’s key trading partners – Hong Kong, South Korea and Taiwan (about 20% of China’s exports) – owing to a shift in the timing of a lunar calendar festival (mid-Autumn/Chuseok).

Considering daily average exports, we estimate that export growth to these three economies should be flat on a y/y basis, rather than show a decline of 4.5% y/y (or a drag of about 1 percentage point to total exports).

Hence, after adjusting for the two factors, we estimate that exports actually rose by about 3.5% y/y in September.

Even so, this is still less than half the ‘true’ growth rate in July-August (7.7%; after similar adjustments for the high base from earlier fake reporting).

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