Chinese trade data missed to the downside in October with the value of exports and imports both undershooting expectations, at least in US dollar terms.
According to China’s Customs Bureau, the value of US dollar denominated exports declined by 7.7% from the levels of a year earlier, missing forecasts for a drop of 6.0%.
Though weak, the contraction was smaller than the 10.0% drop recorded in the 12 months to September.
In yuan-denominated terms, exports fell by 3.2% from a year earlier, a slightly narrower drop than the 5.6% level seen in September.
In the 12 months to October 2016, the Chinese yuan fell by around 7% against the US dollar, helping to explain the difference between the US dollar and yuan-denominated figures.
Julian Evans-Pritchard, China economist at Capital Economics, said that the improvement seen in October appears to reflect a recent strengthening in global demand.
“Markit’s global manufacturing PMI rose to a two-year high in October, with improvements all of China’s key trading partners including the US, EU and Japan,” he said immediately following the release of the trade report.
“Most countries have yet to publish trade data for October but the other early reporters, Korea and Taiwan, also posted a pick-up in export growth.”
On the other side of the ledger, the value of imports fell by 1.4% from October 2015 in US dollar terms, an improvement on the 1.9% drop seen in September but below forecasts for a decline of 1.0%.
In yuan-denominated terms, imports grew by 3.2% over the same period.
This likely reflects strength in industrial commodity prices, due in part to tight supply and ongoing demand from the China’s industrial and construction sectors.
In volume terms, imports of iron ore fell to 80.8 million tonnes, down from 93 million tonnes a month earlier, while crude imports dropped to 28.79 million tonnes from 33.06 million tonnes in September.
Coal imports, after receiving plenty of attention over the past month as prices for coking and thermal coal rocketed higher, dropped to 21.58 million tonnes, down from 24.44 million tonnes reported previously.
For the month, the trade surplus grew to $US49.06 billion, up from $US41.99 billion in September. It was slightly below the median economist forecast that was looking for an increase to $US51.7 billion.
While financial markets have, as yet, expressed a different view, Evans-Pritchard called the result “reassuring” after a weak result in September.
However, he doesn’t expect the nation’s trade performance to improve much further in the period ahead.
“With both global and domestic growth unlikely to accelerate much further, the medium-term outlook for Chinese trade remains challenging,” he says.
“The scope for a more significant recovery in global demand, and therefore Chinese exports, is probably limited given our view that the current pace of global growth is likely to be as good as it gets for the foreseeable future.
“The ongoing cyclical rebound in China’s economy should support imports for another quarter or two but is unlikely to last much longer given that the boost to growth from earlier policy easing is set to fade before long.”
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