Chinese imports and exports slowed unexpectedly in July, casting doubts about the vigour of its recent economic performance.
- China’s trade surplus widened to $US46.7 billion despite slowing imports and exports
- Weaker than expected figures dragged down regional exchanges and commodity prices
- Iron ore imports fell 8.9pc in July pointing to a slowing demand
While imports grew for the ninth consecutive month, they cooled markedly in July, posing questions about strength of the local economy.
Exports also slowed to most trading partners, with South Korean trade halved and a noticeable slowing of shipments to the US and Europe.
However, the performance was good enough to see China’s trade surplus edge up to $US46.7 billion, its widest margin since the start of the year.
Capital Economics analyst Julian Evans-Pritchard said despite the uptick at the end of second quarter, trade growth now appears to be on a downward trend.
“The declines can be partly explained by negative price effects due to cooling producer price inflation,” Mr Evans-Pritchard said.
“We estimate that export volumes rose 6.7 per cent over the year in July, down from 11.6 per cent in June, while import volumes rose 5.9 per cent [yoy] down from 12.4 per cent.
“In particular, the sharp decline in import growth since the start of the year suggests that domestic demand is softening.”
|China trade in $US terms||July||June||Forecast|
|Imports: percentage change||11pc||17.2pc||16.6pc|
|Exports: percentage change||7.2pc||11.3pc||10.9pc|
The disappointing data cast a pall over major regional stock exchanges with Japan, South Korea and Shanghai all slipping.
The demand for commodities on Chinese futures exchanges also waned. Iron ore and coking coal futures on the Dalian exchange were down 2.7 per cent and 1.7 per cent respectively.
Shanghai rebar steel contracts were down 1.4 per cent in early trade.
Iron ore shipments slow
ANZ’s Raymond Yeung noted that, while iron ore shipments were disrupted by rail maintenance in the Pilbara during July, the customs figures pointed to a broader potential slowdown in iron ore imports.
Iron ore imports fell 8.9 per cent over the month to 86.3 million tonnes, their lowest level in three months. That is 2.4 per cent down on the same time last year.
Coal imports were down 9.9 per cent from June, to be more than 8 per cent lower over the year.
“The total value [of iron ore imports] at $US4.9 billion was also below 2017’s monthly average of $US6.5 billion,” Mr Yeung said.
“The Government’s initiative to reduce capacity in the steel sector will continue to make headway; therefore iron ore demand will likely slow in volume terms for the rest of the year.
“However, the price of steel will remain resilient as domestic demand for infrastructure should continue to lend support.”
Mr Evans-Pritchard did not expect slowing export growth to become entrenched given the positive outlook for China’s main trading partners.
“But with the headwinds to domestic demand from policy tightening increasing, we think the slowdown in import growth has further to run,” he warned.
By Stephen Letts