Chinese trade data for September has come in mixed, with a surprisingly resilient performance from exports being largely overshadowed by another sharp plunge in imports.
Compared to a year earlier exports declined by 3.7% in US dollar terms, an improvement on the 5.5% contraction recorded in August and expectations for an acceleration to 6.3%.
On the other side of the ledger, imports tanked, declining by 20.4% from September 2014. The contraction was far below the 13.8% drop of August and the median market forecast for a decrease of 15.0%.
With exports topping expectations and imports missing badly to the downside, the trade surplus rose to $60.34 billion from $60.24 billion in August. The figure, above expectations for a narrowing to $46.79 billion, was the second largest on record, narrowly shaded by the $60.56 billion surplus recorded in February this year.
While markets have reacted negatively to September data, specifically the ugly import figure, Julian Evans-Pritchard, chief China economist at Capital Economics, suggests that there are reasons to be optimistic.
“Stronger-than-expected export figures hint at warming foreign demand,” he wrote in a note following the data release.
“Although imports remained subdued last month, we continue to believe that domestic demand is stronger than these figures suggest.”
Evans-Pritchard believes that the continued decline in exports is largely due to a less flattering base for comparison in recent months, suggesting that the September figures “are consistent with a continued recovery in exports since the start of the year, when global trade was very weak.”
On the slump in imports, Evans-Pritchard suggests that it indicates that domestic demand may have softened over the month, although he does not believe the situation is as dire as the 20.4% drop suggests.
“We continue to believe that the situation is not nearly as dire as the headline contraction in import values, which have been dragged down by global commodity price deflation, suggest. Import volumes are holding up much better,” he wrote.
Looking ahead, he expects “stronger growth in China’s main trading partners to shore up exports over the coming quarters while a pickup in investment spending should boost imports.” Even if that doesn’t materialise, he suggests the figures will continue to improve “as a weaker base for comparison from the sharp fall in commodity prices late last year eases the deflationary drag on trade values.”
Following the September trade data released today, China’s national bureau of statistics will deliver CPI and PPI figures tomorrow along with monetary growth and bank lending figures later in the week. On Monday the data calendar reaches its crescendo with the release of industrial production, retail sales and urban fixed asset investment figures for September, along with the most important of them all, Q3 GDP.
Having seen Chinese data deteriorate over the September quarter, expectations for economic growth have slid in recent months. According to a survey of 26 economists conducted by Bloomberg, GDP is expected to expand by 6.7% in the year to September, down on the 7.0% pace reported in the first and second quarters of the year. If realised, it will mark the slowest annual growth rate seen since the March quarter of 2009, the depths of the global financial crisis.