China’s Export Growth Slows Down but Remains Positive at 8.5%
In April, China experienced a second consecutive month of export growth, with a recorded 8.5% increase in U.S. dollar terms, while imports dropped by 7.9% in comparison to the previous year. According to a Reuters poll of economists, April’s export growth was predicted to reach 8%, while imports were expected to remain unchanged. In March, government data showed that imports declined by 1.4% year-on-year, whereas exports had an unexpected surge of 14.8%.
According to recent data, China’s trade surplus in April increased to $90.21 billion, up from $88.2 billion in March. However, Goldman Sachs economists believe that the softer trade data in April was likely due to “residual seasonality” following the Lunar New Year, and they expected this to slow export growth in April.
Despite disappointing factory data, China’s service sector performed well, and the National Bureau of Statistics reported that the manufacturing purchasing manager’s index fell to 49.2 in April from 51.9 in March, indicating a contraction in the sector.
Goldman Sachs economists noted that China’s economy is now past the fastest stage of its reopening and reiterated their forecast for 6% full-year growth in 2023. While there are some concerns about deflationary pressures, recent meetings with clients in mainland China suggest that pessimism about near-term growth is gradually fading.
Economists anticipate that China’s inflation data, scheduled for release on Thursday, will show a 0.3% year-on-year increase, with prices expected to remain flat on a monthly basis, according to a Reuters poll. Meanwhile, the economy’s producer price index is forecast to decline for the seventh consecutive month, with economists predicting a drop of 3.2%, following a 2.5% decline in March.
In a note, BofA Global Research economists, including Helen Qiao, stated that Chinese central bankers do not seem concerned about deflation, based on the PBoC’s quarterly monetary policy reports and meeting minutes. They added that officials are optimistic about a rebound in inflation and anticipate that inflationary pressure will increase as the output gap narrows in the second half of 2023, particularly with the start of a new credit cycle.