Export dynamics slow in China

export in china slower
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The Chinese trade balance deteriorated in August on slower exports growth and still resilient imports growth.

Contrary to consensus expectations, the Chinese trade surplus declined for the first time in six months, albeit moderately. This was mainly driven by a weaker-than-expected exports performance. In USD terms, exports growth moderated to 5.5% YoY in August from 7.2% YoY in July. With the important exception of emerging Asia and Brazil, exports growth to most destinations slowed, and most significantly to Japan and Europe. Imports growth remained resilient, printing 13.3% YoY in August after 11.0% YoY in July.

We do not expect YoY growth of exports to re-accelerate from here as headwinds are building up. First (and technically), base effects are becoming more challenging as we now enter the period of strong trade growth 12 months ago. Second, the currency has appreciated significantly against the USD, but is also up on a trade-weighted basis. Still, we believe that the growth contribution of net trade should be positive for overall GDP growth in 2017, following a negative contribution in 2016.

Other data highlights

  • CHINA, INFLATION: Headline consumer price inflation in China rose to 1.8% YoY in August from 1.4% YoY in July. Excluding energy and food prices, core inflation ticked up slightly from 2.2% YoY vs. 2.1% YoY in July. Producer prices rose 6.3% YoY in August, up from 5.5% YoY in the month before. The gain was due to an uptick in raw material prices, while prices gains for consumer gains came in at 0.6% YoY (after 0.5% YoY in July).

Investor Watchlist

Bank of England policy rate (%) (Thu.): Consensus: 0.25; Prior: 0.25
We expect the Bank of England (BoE) to stay on hold as we see inflation moderating further, while growth data should stay relatively soft.
Swiss National Bank policy rate (%) (Thu.): Consensus: –0.75; Prior: –0.75
As suggested by a recent interview of Thomas Jordan, chairman of the Swiss National Bank’s (SNB) board, the SNB will likely keep its monetary policy stance unchanged at the upcoming meeting. Any change in its policy rate or even discussion thereof seems highly unlikely to us.
US August CPI (% YoY) (Thu.): Consensus: 1.8%; Prior: 1.7
Headline inflation is expected to rise slightly, mainly on account of somewhat higher energy and food prices. Core inflation on the other hand is expected to tick lower from 1.7% YoY to 1.6% YoY as base effects are likely to cause healthcare price inflation to soften again.
UK August CPI (% YoY) (Tue.): Consensus: 2.8; Prior: 2.6
Consumer price inflation in the UK is expected to have increased slightly in August, mainly driven by energy prices.

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