China’s trade surplus narrowed sharply in January, thanks to an enormous increase in imports.

According to China’s General Administration of Customs, imports surged by 36.9% from 12 months earlier in US dollar terms, nearly four-times higher than the 9.8% increase expected by economists.

It was also a marked improvement on the 4.5% gain recorded in the year to December, and the fastest annual growth since February 2017.

Over the month, imports of crude oil, coal and iron ore stood at 40.64 million tonne, 27.81 million tonnes and 100 million tonnes respectively.

According to calculations from Reuters, crude imports were a record high on a per day basis, rising to 9.57 million barrels per day, surpassing the previous record peak of 9.17 million barrels per day set in March last year.

For coal, it was the largest monthly total since January 2014, and the second largest on record for iron ore.

Exports also topped forecasts, lifting 11.1% over the year, breezing past expectations for a smaller increase of 9.6%.

That too was an acceleration on the 10.9% level reported one month earlier.

With the dollar value of imports rising faster than those for exports, it saw the trade surplus narrow sharply to $20.34 billion, below the $54.69 billion figure of December and forecasts for a smaller decrease to $54.1 billion.

It was the smallest trade surplus since February 2017.

On the surface, the headline figures, especially for imports, point to a Chinese economy that running hut.

However, a degree of caution is warranted.

While few doubt that both the Chinese and global economies have improved over the past year, the timing of Lunar New Year celebrations almost certainly distorted the January figures, much like it will when February’s trade data is released in early March.

Chinese New Year started in late January last year, meaning there were fewer working days, including to take receipts of imports.

“More working days would definitely have an impact,” Gai Xinzhe, an analyst at Bank of China’s research institute told Bloomberg, referring to the holiday in January 2017.

“Though the yuan is getting much stronger against the dollar, its overall rates against other currencies are relatively stable, which could explain why exports data are better than expected.”

Gai offered some sage advice for anyone reading too much in to the January report.

“Trade data in the first two months are extremely volatile and it’s better to look at the first quarter data for a better picture,” he said.

So when import growth likely tanks next month, don’t presume its the end of the road for the Chinese economy.

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