China: Exports rise in July despite strong headwinds
In July, exports rose 3.3% over the same month last year, contrasting the 1.3% decrease in June. The print, however, beat analysts’ expectations of a 1.0% decrease.
Imports fell 5.6% in annual terms in July, following June’s revised 7.4% drop (previously reported: -7.3% year-on-year). The reading was better than the 9.0% decline that market analysts had projected.
As a result of the sharp decrease in imports, the trade surplus rose from USD 27.5 billion in July 2018 to USD 45.1 billion in July 2019 (June: USD 51.0 billion surplus). The 12-month moving sum of the trade surplus increased from USD 397 billion in June to USD 414 billion in July.
The external sector is suffering from the trade war with the United States, Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, comment that in retaliation of the new U.S. tariffs effective 1 September “payback effects are likely to follow and downward pressures on exports may increase thereafter, especially from the re-escalation of the US-China trade conflict […] the weakening global economy and the continued global tech downcycle. Although recent sharp depreciation of RMB may offer some support for exports, we believe it is insufficient to offset the strong headwinds. That said, we expect import growth to remain sluggish in coming months, given weakening domestic demand and subdued oil price inflation.”