Last month I suggested that Chinese industry was not doing as badly as the August year-on-year (YoY) series suggested, a rise of just 4.4%. This was because the seasonally adjusted month-on-month (MoM) series, theoretically a much better guide, implied a higher YoY rate of 5.5%.
September’s data was released today and shows the YoY series rebounding more strongly than market expectations, now up 5.8% YoY.
In part this was because September saw a strong 0.72% MoM increase.
Source: NBS, Matthew Turner, October 2019
But it also looks like some catch-up with the implied YoY series.
Source: NBS, Matthew Turner, October 2019
Year-to-date (YTD) Chinese industry is actually slightly outperforming how it did in 2018 using this MoM data*.
* Of course one might not believe any of the data series.
Source (this and all charts): National Bureau of Statistics
We need to keep in mind that this data is not seasonally adjusted and can show some wild swings. This is especially true in February and March, when the shifting dates of Chinese New Year have a large impact. Only five months ago in March 2019 IP growth was reported as up 8.5% YoY, clearly an aberration.
What we need is an estimate of the level of Chinese industrial production. But the National Bureau of Statistics (NBS) does not publish one.
What it does publish, however, is a seasonally adjusted month-on-month (MoM) growth rate. This too is rather odd, showing distinct seasonal patterns, but in 2019 has also been trending downwards. In August it was just 0.32% MoM, the slowest rate in the last three years and a mere 4% annualised.
The MoM series can be used to back out a level of IP, and from this an alternative YoY growth rate. It is noticeable this paints a less pessimistic picture than the official YoY series, showing in August a YoY rate of around 5.5%. But it is also true that this backed-out series has been higher than the official series for much of the last year, somewhat of a puzzle.
Interpreting Chinese data is never easy, even if you accept them at face value. From the NBS’s two series it seems safe to conclude IP growth is slowing, though perhaps not as severely as the YoY numbers suggest. On a YTD basis industry has expanded not much less than in 2018. But the last two months have been weak. September’s data will be interesting.
