Trying to track China's economic course during the Lunar New Year can leave analysts howling at the moon. January auto sales tumbled, yet oil imports were the third highest on record. A measure of factory activity picked up, but trade data was weak.
A closer examination of the numbers shows bearish signals lurking beneath the confusing headlines.
Western banking analysts accustomed to a solar calendar that dates from Roman times have their run-ins with China's even more ancient lunar calendar every year. Sometimes the new year holiday lands in January, as it did this year. But last year it was in February, wreaking havoc with year-on-year comparisons.
The latest calendar clash comes when China's economy is under an unusually bright spotlight, as economists try to figure out how dramatically it is slowing. A mild cooldown would be a welcome development for inflation-wary Beijing; a sharp slump could kick out the last sturdy piller underpinning global growth.
Data released so far shows headline figures for almost everything were down in January, when almost half the month was taken up by the holiday. Comparing the figures with the prior year or even the prior month can be misleading.
But the steel and export sectors looked particularly weak, even factoring in the holiday effect, leaving some analysts worried that the soft patch runs deeper than the lunar cycle.
Exports fell by 0.5% and imports by a much steeper 15.
But nestled amid all the gloomy figures were some surprisingly upbeat data points. A January survey on China's factory sector was sunnier than expected. China's crude oil imports surged 7.4% in January to the third-highest level on record, which doesn't mesh with a severe economic slowdown.
"Our simple and humble suggestion is to wait for February data to come out and read two months' data together," said Ting Lu of Bank of America Merrill Lynch with weariness born of long experience.
That's what the Chinese government does. It lumps together the figures most influenced by factory closures, like industrial production and output data, into a combined January-February figure. The Lunar New Year never falls outside those months.
While the January data by itself always gives a distorted picture, some of the numbers that can be parsed show the impact of the debt crisis affecting China's trading partners.
For instance, the processing trade, wherein Chinese factories import raw materials to make goods for export, saw a steeper drop than did overall trade in January. Processing trade fell 9.8%, versus a 5.4% drop in overall trade.
Most analysts pointed to a slowdown in Europe as a cause for concern, and indeed bilateral trade fell 7.1% versus 3.9% for trade with the United States, where the economy has shown signs of stabilising.
But trade with Japan was hurt the most, falling by 18.4%, while Southeast Asian trade was down by 10.6%.
Further breakdowns showed that overall trade fell most sharply for China's traditional export powerhouses, reflecting to some extent a shift of export manufacturing to inland provinces where wages are lower. Total trade from Guangdong, Jiangsu, Zhejiang and Shandong all took a hit, while inland areas like Chongqing and Henan saw exports double.
Cool commodities data
Headline commodity figures are also too impacted by the holiday to be of much use. But here, a few signs point to domestic demand weakness.
Many analysts noted lower iron ore imports. Two signs indicate that this is due to more than the holidays -- inventories in Chinese ports are high, and steel output slowed to 1.67 million tonnes a day in latter part of the month, compared with nearly 2 million tonnes in the summer of 2011.
Since shutting down a furnace is so costly, the lower runs reflect a drop in demand from the hard-hit construction sector rather than the holiday.
The value of oil imports, which account for about 15% of total import value, rose much more than the volume of oil imports in January -- reflecting higher oil prices than last year. Without that bump, import values would have been even lower.
China's copper purchases tend to be another good sign of the economy's health. In this case, volumes were up as buyers took advantage of a drop in international prices to around USD 8,000 a tonne, versus USD 9,500 the year before.
But more volatile scrap copper imports are an indicator of how tight spot demand is for copper, and those dropped sharply.
The calendar dictates that overall data should be down.
The new moon that heralded the Year of the Dragon fell on January 23, 2012, while the Year of the Rabbit began on February 3, 2011.
So for white collar office workers, that meant 17 official working days versus 20 working days in January 2011. Factories generally operate on weekends, complicating the calculation.
Simply discounting last year's January data by the 15% drop in official working days could still give too strong a forecast.
Many factories begin shutting and workers headed home as much as two weeks before the actual New Year. Chinese ports and customs bureaux tend not to pick up the pace of processing cargoes until after the Lantern Festival, which falls on the full moon two weeks after the New Year, or February 6 this year.
That puts most of the unofficial holiday squarely in January this year. Last year, by contrast, all of January fit into the pre-holiday season.
The offset helps explain the higher-than-expected inflation data in January this year. Prices in Chinese markets tend to rise before the holiday, as more people stock up for a home-cooked feast and winter weather impedes transportation.
"Of course there's seasonality, but that can't explain all of it," said Dong Tao, chief economist for non-Japan Asia at Credit Suisse.
"Iron ore and commodities imports fell markedly. This directly reflects China's economic situation, that the demand is not there."