Week 202333
China’s trade markers fell much faster than expected in July as weaker demand threatens recovery prospects in the world’s second-largest economy, heightening pressure for authorities to release fresh stimulus to steady growth.
The grim trade numbers reinforce expectations that economic activity could slow further in the third quarter, with construction, manufacturing and services activity, foreign direct investment and industrial profits all weakening.
Imports dropped 12.4% in July year-on-year, customs data showed on Tuesday, missing a forecast fall of 5% in a Reuters poll and off a 6.8% decline in June. Meanwhile, exports contracted 14.5%, steeper than an expected 12.5% decline and the previous month’s 12.4% fall.
The pace of export decline was the fastest since the onset of the pandemic in early 2020 and the tumble in imports was the biggest since January this year, when COVID infections shut shops and factories.
While the weakness in the value of imports reflects poor demand, falls in commodities prices have also exacerbated the headline declines, analysts say.
“Most measures of export orders point to a much greater decline in foreign demand than has so far been reflected in the customs data,” said Julian Evans-Pritchard, head of China economics at Capital Economics.
“And the near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of recessions later this year, albeit mild ones.”
China’s trade dynamics grew at a sluggish pace in the second quarter as demand weakened at home and abroad, prompting top leaders to promise further policy support and analysts to downgrade their growth forecasts for the year.
The headline import figure was worse than forecast because “economists may be misunderstanding the price factors underlying commodities, which dominate Chinese imports,” explained Xu Tianchen, senior economist at the Economist Intelligence Unit.
“For example, China is importing more oil but at lower prices, as a result the volume of crude oil accelerated in July, but the import value slowed. Similar logic holds for grains and soybeans.”
Crude oil shipments to the world’s biggest oil importer were 17% higher in July than the same period last year, but fell 18.8% from the previous month to the lowest daily rate since January, while soybean imports in July jumped 23.5% from a year ago, off the back of near-record production in Brazil.
Source: Reuters
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