JAKARTA - IHS Global Insight provided updates on Chinese exports data.
Following is the highlights:
- China’s Customs Administration reported today that exports fell 4.8% in June in USD-terms, compared to a 4.1% decline in the previous month. The faster contraction was primarily due to deteriorating exports to the EU, Hong Kong and ASEAN, while exports to the US improved. In value terms, the largest deterioration was in exports of integrated circuits, precious metals and aluminum. Exports of steel products, general mechanical and electrical products, and high tech products improved,relative to a month prior.
- Imports contracted by 8.4%, an 8 percentage point drop,relative to a month prior. Imports from the EU and ASEAN swung from expansion to contraction, while imports from Japan stagnated. In value terms, the largest deterioration was in imports of mechanical and electrical products; coupled with partner data, this indicates a decline in semi-processed manufactured goods. Oil import volumes grew 3.8%, while values fell 26.4% — in both cases a significant deterioration from the previous month.
- China’s trade balance remained elevated at US$48.1 billion in June. China’s average monthly trade balance in the first six months of 2016 isUS$43.1 billion, compared to an average of US$49.5 billion in 2015.
IHS Global Insight Views:
China’s weak trade data indicates slowing manufacturing profits. Industrial output weakened after a surge in March. Slower export growth will weigh on nominal industrial revenues and profits, and thus industrial value added for June, in sectors with greater exposure to exports.
The latest export data are generally consistent with our expectations of a second quarter slowdown. China will publish GDP and industrial output data for the second quarter on 15 July; IHS projects that GDP growth will slow from 6.7% to 6.5%. Furthermore, monetary policy is expected to loosen in the third quarter in response to weaker nominal output figures, including in the export manufacturing sector.
Chinese officials acknowledged that risk remains weighted on the downside.Custom’s officials stated that downward pressure on exports will continue into the third quarter. Officials added that high labor cost relative to competitors was one disadvantage for Chinese exporters. (*)