If you’re looking for clarity on China’s economy from the April trade data, you can go ahead and look elsewhere.
Last month, a string of upbeat prints and better-than-expected numbers on everything from manufacturing activity to credit growth to industrial production suggested the world’s second-largest economy inflected for the better in March.
The news was received well by macro watchers, but it came with myriad caveats, including the usual warnings about holiday distortions and also cautious commentary around the possibility that too much of a good thing could actually be “bad” to the extent better data prompted Beijing to deploy less stimulus going forward.
PMI data for April suggested the recovery is still fragile in China and trade data for the month amusingly tells a completely different story than the March numbers.
You’ll recall that in March, China’s exports rebounded after the holiday, rising 14.2% YoY, suggesting external demand was firming despite simmering trade tensions and myriad risks to the outlook. On the downside, imports fell 7.6%, raising questions about the durability of the domestic economy.
April’s figures flip that on its head. Exports fell 2.7% for the month, missing consensus calls for a 3% increase, while imports rose 4%, beating expectations for a decline.
“The drop in year-on-year exports growth in April was primarily due to the fading of distortions from Chinese New Year which pushed up year-on-year growth in March significantly”, Goldman wrote Wednesday, adding the following more granular color:
Growth of exports to major destinations was down meaningfully in April, compared to both March and the average for Q1. Exports to the US decreased by 13.1% yoy, down from +3.7% yoy in March (-9.2% yoy on average for Q1). Exports to the EU and Japan dropped as well to +6.5% yoy and -16.3% yoy in April, respectively. Exports to ASEAN were up 0.7% yoy in April, down sharply from +24.8% yoy in March.
For their part, Barclays sounds a decidedly cautious tone. “The fall in exports appears to exceed seasonal softness and it was broad-based, with the April print weaker than the overall Q1 performance… reflecting some resumed weakening in external demand, following a short-lived and small recovery in March, as evidenced by the largely declining global PMIs led by the US and still-weak regional exports performance”, the bank writes, in their own breakdown of the numbers.
The bank sees ongoing weakness in external demand and continues to expect tepid export growth for the balance of H1.
As far as imports go, a generous interpretation might be that domestically-focused stimulus is paying off, but a more nuanced take is less sanguine. “The rebound in China’s imports was largely driven by major commodity exporters, which likely reflected recovering infrastructure investment and strong real estate investment”, Barclays said Wednesday, while Goldman notes that “back-loading of imports to save tax costs after the VAT cut effective on April 1 could have distorted imports in April upwards.”
Needless to say, the resumption of trade tensions with the US isn’t going to do anything to help bolster external demand.
Chinese stocks tumbled again on Wednesday, erasing Tuesday’s feeble attempt at a rebound following Monday’s massacre. Nearly halfway through Q2, Mainland China’s miraculous Q1 rally is starting to look increasingly anomalous.
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