- China’s October exports and imports drop unexpectedly
- Weak data deals another blow to struggling economy
- Global recession risks, COVID slowdowns in China cloud outlook
- Analysts expect further weakness in exports and imports
BEIJING, Nov 7 (Reuters) – China’s exports and imports unexpectedly contracted in October, the first simultaneous decline since May 2020, as a perfect storm of COVID slowdowns at home and risks of global recession hit demand and further darkened the outlook for a struggling economy.
The bleak data highlights the challenge for policymakers in China as they press ahead with pandemic prevention measures and try to overcome broad-based pressure from rising inflation, sharp increases in global interest rates and a slowdown global
Outbound shipments in October fell 0.3% from a year earlier, a sharp turnaround from a 5.7% rise in September, official data showed on Monday, and well below analysts’ expectations of a 4.3% increase. It was the worst performance since May 2020.
The data suggest demand remains generally fragile, with analysts warning of further gloom for exporters in the coming quarters, increasing pressure on the country’s manufacturing sector and the world’s second-largest economy facing the persistent curbs from COVID-19 and prolonged property weakness.
Chinese exporters were unable to even take advantage of a prolonged weakening of the yuan since April and the key year-end shopping season, underscoring growing strains for consumers and businesses around the world.
The yuan eased from a more than one-week high against the dollar hit in the previous session on Monday, as weak trade data and Beijing’s pledge to continue its strict zero-Covid strategy hurt sentiment.
“Weak export growth likely reflects both weak external demand and supply disruptions due to the COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing as an example the disruptions from COVID in a factory of Foxconn, an important supplier of Apple. .
Apple Inc ( AAPL.O ) said it expects lower-than-expected shipments of high-end iPhone 14 models after a key production cut at its virus-hit Zhengzhou plant.
“Looking ahead, we believe that exports will fall further in the coming quarters…We believe that aggressive financial tightening and the drag on real incomes from high inflation will push the global economy into recession next year ” said Zichun Huang, an economist at Capital Economics.
Growth in auto exports in volume terms also slowed sharply to 60% year-on-year from 106% in September, according to Reuters calculations based on customs data, reflecting a shift in demand for goods to services in the main economies.
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DOMESTIC DEFENSES MAKE GROWTH DIFFICULT
Nearly three years into the pandemic, China has adhered to a strict policy of containing COVID-19 that has taken a heavy economic toll and led to widespread frustration and fatigue.
Weak factory and trade figures in October suggest the economy is struggling to climb out of the mud in the final quarter of 2022, after picking up faster than expected in the third quarter.
The war in Ukraine, which caused an increase in already high global inflation, has added to geopolitical tensions and further dampened business activity.
Chinese policymakers pledged last week to prioritize economic growth and push ahead with reforms, allaying fears that ideology could take precedence as President Xi Jinping begins a new leadership term and disruptive blockades continue without a clear exit strategy in sight.
The tepid domestic demand, partly weighed down by cold snaps and the COVID lockdowns in October, hurt importers.
Inbound shipments declined 0.7% from a 0.3% rise in September, below expectations for a 0.1% rise, marking the weakest result since August 2020.
The harsh impact on demand from strict pandemic measures and a property slump was also highlighted in a wide range of Chinese imports; soybean purchases fell to eight-year lows last month, while copper imports fell and coal imports fell after hitting a 10-month high in September.
In addition to the global slowdown, fragile domestic consumption will put more pressure on China’s economy for some time, analysts say.
“Insufficient domestic demand is the main constraint on China’s near-term recovery and long-term growth trajectory,” said Bruce Pang, chief economist at Jones Lang Lasalle.
(This story has been corrected to change October coal imports from a decline to a slowdown, in the last paragraph)
Reporting by Ellen Zhang and Ryan Woo; Shri Navaratnam Edition
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