Unexpectedly Intriguing!
March 10, 2015

Going by the international trade data collected by the U.S. Census Bureau, it appears that the U.S. economy joined China in experiencing contraction in January 2015.

For China, January 2015 marks the fifth month in a row that our alternative measure of the relative health of national economies, which we determine by calculating the exchange rate-adjusted year-over-year growth rate of the value of trade between nations, has indicated that the Chinese economy has contracted. And though the data for both January and February is affected by the variable, lunar calendar-based timing of China's Spring Festival (a.k.a. "Chinese New Year"), that timing is not much of a significant factor between January 2014 and January 2015.

Meanwhile, we see that the year-over-year growth rate of goods exported by China to the U.S. indicates that the U.S. economy has dipped to levels that are consistent with recessionary conditions.

Year Over Year Growth Rate of Value of US-China Trade, January 1986 through January 2015

Looking first at China's ongoing decline in the growth of the value and volume of goods it imports from other nations, here's the early picture for February 2015, in which China's official trade statistics indicate saw a 48% increase in year-over-year exports, but another decline the value and volume of goods that it imports:

Exports to most destinations increased while imports from commodity exporters led the decline. The country breakdown suggests that exports to most destinations rebounded with the exception of exports to Russia and Japan, which contracted 27% and 4.4% year on year, respectively. On the other hand, imports from major commodity exporters Australia, Brazil, New Zealand, Russia, and South Africa dropped again. - Jian Chung, Shengzu Wang and Yingke Zhou, Barclays Research

Given its historical inaccuracy, trade and economic statistics reported by China's government agencies should be taken with a strong grain of salt, as even the nation's leaders believe the data can only and should only be used to get a general sense of the overall direction of China's economy.

That's not an issue for our alternative economic health indicator, which we developed to get around that problem by using trade data collected by the U.S. Census Bureau related to the value and volume of goods exported from China to the U.S. or imported into China from the U.S.

What may be a factor however is the variable, lunar calendar-based timing of China's week-long Spring Festival (a.k.a. "Chinese New Year"), which may be greatly affecting the trade data reported in February 2015, and which may have greatly increased China's reported exports for the month as Chinese firms rushed to complete export orders before the holiday, which fell near the end of the month.

The reduction in imports however does suggest that the internal sluggishness of China's economy is continuing, as a growing economy would demand the import of growing levels of commodities to support its growth.

Meanwhile, the sudden dip of the year-over-year growth rate of Chinese goods imported into the United States may be a result of a labor union action at the U.S. west coast's port facilities, where union members have been engaging in a labor action that has severely disrupted the timely loading and unloading of cargo to and from the U.S., creating a large traffic jam of goods that has been negatively impacting the U.S. economy since October 2014. Those actions had intensified in February 2015 as the labor contract negotiation deadline neared.

While that action ended when the labor unions reached an agreement for a new 5-year contract on 23 February 2015, the damage from the union's productivity slowdown is expected to take weeks or months to unwind.


Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 9 February 2015.

U.S. Census Bureau. Trade in Goods with China. Accessed 9 February 2015.

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