China’s exports elevated by 8.5% and continued to develop at a slower tempo

QINGDAO, CHINA – MAY 06: Aerial view of the illuminated Qingdao Qianwan container terminal at dusk on May 6, 2023 in Qingdao, Shandong province of China.

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China’s exports rose 8.5% in April in US dollar terms, marking a second straight month of growth, while imports fell 7.9% yoy.

Economists polled by Reuters estimated that exports would rise 8% in April, while imports are expected to remain flat. In March, imports fell 1.4% yoy, while exports posted a surprise 14.8% increase, government data showed.

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China’s trade surplus widened to $90.21 billion in April from a surplus of $88.2 billion in March.

Softer trade data in April likely reflects “residual seasonality” after this year’s Lunar New Year, economists at Goldman Sachs said in a note Monday.

Goldman Sachs economists expected “this seasonal trend of slow export growth to ease in April,” they wrote in a note previewing China’s trade data earlier this month.

The latest economic data from the world’s second largest economy showed that China’s service sector remained a bright spot despite disappointing factory data.

The National Bureau of Statistics’ manufacturing purchasing managers’ index missed expectations, falling into contraction territory at 49.2 in April, compared with a reading of 51.9 in March.

“China has passed the fastest phase of its reopening,” economists at Goldman Sachs wrote in a separate note on Friday. She reiterated her forecast for China’s economy with full-year growth of 6% in 2023.

“Recent meetings with mainland clients suggest that pessimism about near-term growth is beginning to fade, but some concerns remain about deflationary pressures, although we don’t think this poses a major risk for 2023-24,” they wrote.

inflation ahead

China’s inflation data is due to be released on Thursday. According to a Reuters poll, economists expect inflation to slow to 0.3% yoy.

According to the survey, prices will remain the same from month to month.

The economy’s producer price index is expected to fall for the seventh straight month after the index fell 2.5% in March. Economists polled by Reuters expect a 3.2% decline.

“Central bankers in China appeared to have little concern about deflation, judging by the PBoC’s quarterly monetary policy reports and meeting minutes,” economists at BofA Global Research, including Helen Qiao, wrote in a note, adding that officials appear optimistic that inflation will pick up again soon.

BofA economists said they “expect inflationary pressures to pick up as the output gap narrows in 2H23, particularly given the start of a new credit cycle.”

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