We’ve already seen poor industrial production data and cooling inflation raise expectations for more easing from Chinese policymakers.Tonight China will release trade data for July including imports, exports and trade balance.
Investors will be watching these numbers closely for more signs of an economic slowdown, especially since Chinese import data is considered to be one of its more reliable economic indicators.
Here’s what to expect:
Societe Generale’s Wei Yao
Imports are expected to climb 7 per cent year-over-year (YoY) in July, up from 6.3 per cent in June.
Yao has previously said that import data is a more reliable since it can be easily cross-check with trading partners. But it’s also an important data point for China hard/soft landing watchers since it has a tremendous domestic component and shows the state of domestic demand growth.
Bank of America’s Ting Lu
Imports are expected to grow 7 per cent YoY in July. “Import could pick up on domestic policy fine-tuning and stabilised commodity prices”.
Exports are projected to increase 5 per cent YoY in July, compared with 11 per cent in June.
Yao points out that leading indicators for Chinese exports haven’t shown any signs of improvement, and the export sub-index in the PMI report declined to 46.6 in July. Moreover, South Korea, considered the canary in the coal mine of Asian exports, saw its exports plummet 8.8 per cent YoY in July and all these signs combined suggest that Chinese exports likely didn’t hold up in July.
Exports are expected to climb 8 per cent YoY.
“Based on trade data of upstream economies like Korea/Taiwan and sharply lower growth of processing imports in 2Q12, we see strong headwinds to China’s exports in 2H and we expect yoy export growth in 2H to fall below 1H rate of 9.2%.”
Trade surplus is expected to narrow to $30.2 billion in July given the decline in exports.
Trade surplus could widen to $34 billion.