ChartBrief 91 – Surprising Surge In Chinese Exports Will Prolong The Rebound

The world’s second largest economy has reported a number of interesting datapoints for those willing to dig a little to get to the economic data pay-dirt.  The first indication is in the sub-indexes of the official PMI: indeed the latest results for June show new export orders +1.3 to 52.0 – at their strongest point since April 2012.  The second indication is the surge in rail freight traffic volume growth – an indicator which had actually crashed to the worst pace of growth on record in late 2015.  The third point is the rebound and ongoing upward trend in the China Containerized Freight Index, which also provides an insight into and confirmation of the trade rebound for China.  Fourth is the weakening of the Renminbi, in this case we show a chart of the BIS real effective exchange rate, and there is a clear historical link between a weaker currency and better export growth.  Finally the fifth point is the plain old headline official export numbers which have turned around

Overall there are a number of different data points that outline the rebound in Chinese exports, and the potential is there for this to further surprise to the upside against the almost perennial negative postulations and prognostications on the outlook for China.  It’s not to say there are not risks in China – indeed we advise clients to look closely at the property market.  But at least on the global trade front, there is a tailwind for China’s economy, and that could prolong the current stimulus induced upturn in China macro; which would extend the reflation, commodities, and EM theme.

ChartBrief 81 – China PMI Muddles Along In May

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

The weaker currency has helped boost exports, and along with the surge in rail traffic volume growth, the headline export numbers have rebounded.

Chinese Exports

A more obscure China/global trade indicator; the China Containerized Freight Index shows an initial rebound and general upward trend, reflecting improved demand for shipping.

Chinese Exports

For more and deeper insights on the global markets, good charts, and actionable investment ideas you may want to subscribe to the Weekly Macro Themes - our institutional service.  Click through for a FREE TRIAL.

Article by Callum Thomas, Top Down Charts


About the Author

Top Down Charts
Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.