China's trade figures in February hit with double whammy

Exports and imports likely to decline 5% and 10% respectively.

According to DBS, due to the different timing of the Chinese New Year(10 February vs 23 January in 2012), February trade activities distorted downward in year-on-year term. While exports growth is projected to down to 5% last month, DBS forecasts a 10% fall in imports. 

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In addition to seasonal pattern, imports underperformed exports as lingering high inventories continue to weigh on commodity import demand. The CNY distortion affects inflation too.

According to the high-frequency data from the Ministry of Commerce and the Ministry of Agriculture, February food prices were overall higher than that in January. 

As such, year-on-year CPI inflation is estimated to jump to 2.9% last month. But we expect a flat month-to-month PPI amid stable producer goods prices; that translate to a year-on-year drop of 1.7%.

On the domestic activity front, we expect January~February retailsales growth edged down to 15%, as a result of an immediate negative impactfrom Xi’sfrugality campaign on officials’spending.

Given PMI fell in the firsttwo monthsthis year, we projectthe growth of industrial production moderated to 10% overJanuary~February. That said, fixed asset investment growth is expected to pick up to 21% in the same period, boosted by strong credit expansion before the CNY.

On the monetary side, considering the PBoC drained a net Rmb253bn from the marketthrough repo operations, we estimate M2 growth dipped to 15% in February.

Meanwhile, with the ‘Big four’ banksrecording a sharp decline in total loansin the week after CNY, we expect new lending fellto Rmb750 billion.