China’s trade figures point to weak domestic demand in June 201210 July, 2012, 12:06. Posted by Zarathustra
The latest trade data for June suggest that domestic demand of China continues to be weak. Import only increased by 6.3% yoy in June compared to 11.0% of consensus estimate, while export increased by 11.3%, above consensus estimate of 10.6%.
On a month on month (non-adjusted) basis, export fell by 0.5%, while import fell by 8.9% in June, which highlights the fact that the China’s domestic economy is slowing rapidly. On a seasonally adjusted basis, export increased by 4.3% on the month, while import fell by 0.6% on the month, which points to the same conclusion.
Europe continues to be the weakest link as far as exports are concerned. Overall exports to European Union is down 1.1% yoy, or –3.4% when the UK is excluded. Meanwhile, export to the US increased by 11% compared to a year ago, consistent with the relative strength of the US economy in the recent months.
Thanks to weaker import and resilient export so far, the trade balance for June was in a US$31.710 billion surplus, highest since 2009.
Source: General Administration of Customs
We view this as a very weak number. Disappointing import growth highlight the fact that the Chinese economy is slowing rapidly. This is worrying because although export growth has been trending lower amid deep recession in Europe, the consistently weak import growth figures provide evidence that domestic demand is not picking up the slack at all. The weakening of domestic demand suggests that although wider trade surplus adds to GDP, the other components of GDP will probably be very weak, offsetting the “positive” effect of trade surplus.