Beijing statisticians fail to adjust for seasonal factors; Asia Times and the CNY market have done it for you
https://asiatimes.com-by David P. Goldman
Seasonal factors: A screen shows sales information during the 2020 Tmall Global Shopping Festival on Singles’ Day, also known as the Double 11 shopping festival, at a media center in Hangzhou, in eastern China’s Zhejiang province on November 11, 2020. Photo: AFP / STR
China’s disappointing retail sales report for August was a fluke due to seasonal factors, Asia Times analysis shows. Chinese consumer stocks fell sharply after the National Statistics Bureau reported a paltry 2.5% year-on-year increase in retail sales, against an analyst consensus forecast of 7%. Consumer discretionary and consumer staples stocks fell by 2.6% in the CSI 300 Index.
Mark Twain quipped that reports of his death were exaggerated, and the same applies to speculation about a sharp slowdown in China. A closer look at the data shows steady growth in retail sales.
The 2.5% number reflects enormous volatility in retail sales during 2020 more than it does the underlying trend. Year to date, retail sales gained 18.1% compared with the first eight months of 2020. A more accurate reading of the Chinese data shows a 10% year-on-year gain, well above the consensus forecast.
Unlike the United States, China’s statistical bureau publishes data without seasonal adjustment.
Asia Times used two different methods to seasonally adjust the retail sales data, the TRAMO method and the US Census Bureau’s seasonal adjustment program, running on the standard econometrics platform EVIEWS. Both forms of adjustment show a 10% year-on-year increase after seasonality is factored in.
The charts below show the raw Chinese retail sales data as well as seasonal adjustment using TRAMO.
Chinese policymakers have emphasized the importance of domestic consumption as a source of growth, pointing to the outsized export contribution to GDP growth in 2021 as a temporary factor. Although the surprisingly low headline number for retail sales doesn’t reflect the underlying trend, it probably will spur policymakers to support consumption.
The policy instrument closest to hand is the CNY exchange rate. It is noteworthy that CNY rose against the dollar after the retail report. The analysts’ chatter in Western media after the retail release predicted an easing of Chinese monetary policy as a response to economic weakness. That would imply a weaker CNY – but the market went in the other direction.
Chinese exports in August were 26% higher than the year-earlier month in US dollar terms. With demand rising for Chinese goods in the context of COVID-related production constraints around the world, China has room to let CNY appreciate further without significant damage to its foreign sales. A stronger CNY meanwhile would help contain producer-price inflation, now running at nearly 10% a year, and support domestic consumption.