Flagging demand saps China's trade
SCMP headline, July 11
There is a certain peculiarity of economic statistics that can really help journalists out on a slow news day. The oddity is that they rarely show smooth changes of trend. They tend instead to go up and down erratically from month to month.
This makes it easy to say that commercial rentals, for instance, are way up (or way down) this month compared with the previous month, or that restaurant sales show a startling decline (or startling improvement). Just name it and you can find it.
I'm not accusing my colleagues here. I'm just entering my own confession for days gone by when the boss hovered around with that 'What-have-you-done-for-me-today?' look on his face. It was no different when I jumped to stockbroking, by the way. All I discovered was that jumping from the frying pan puts you in the fire.
But it did teach me the use of moving averages if I really wished to see a trend. They tell you late, but they tell you true.
All of this is just to say that if you want to see the trend in a country's export figures, most times you really cannot do it with a moving average of less than six months. If you want to see the trend in a country's trade balance, and not be thrown off by seasonal distortions, you probably need to raise this to a 12-month moving average.