China’s exports have grown for the second consecutive month, albeit at a slower pace, rising 8.5% in US dollar terms in April, while imports fell 7.9% compared to the same period last year. Reuters economists had predicted a rise of 8% in exports and no change in imports. In March, government data showed a surprise jump in exports by 14.8%, while imports fell 1.4% year-on-year.
According to government data, China’s trade surplus increased to $90.21 billion in April, compared to $88.2 billion in March. Economists from Goldman Sachs stated in a note on Monday that the weaker trade figures in April may be due to “residual seasonality” following the Lunar New Year earlier this year.
In a note previewing China’s trade data earlier this month, economists at Goldman Sachs predicted that there would be a slowdown in export growth due to the dissipation of seasonal bias in April. Despite disappointing factory data, recent economic data from China, the world’s second-largest economy, showed that its service sector remained a positive area.
Goldman Sachs economists wrote in a note on Friday that the National Bureau of Statistics’ manufacturing purchasing manager’s index reading of 49.2 in April, which was below expectations and in contraction territory, indicated that China is no longer in the fastest stage of its reopening. However, despite this, the economists reiterated their forecast for China’s economy to grow by 6% for the full year of 2023.
“They wrote that their recent meetings with clients in mainland China indicate a gradual reduction in pessimism regarding near-term growth. However, there is still some concern about deflationary pressures, although they believe that this is not a significant risk for 2023-24.”
On Thursday, China is scheduled to release its inflation data. According to a Reuters poll, economists anticipate a 0.3% year-on-year rise in inflation, with no change in prices on a month-on-month basis. The producer price index is expected to fall for the seventh consecutive month, with economists polled by Reuters predicting a 3.2% drop, after the index declined by 2.5% in March.
In a note, BofA Global Research economists, including Helen Qiao, stated that the People’s Bank of China’s quarterly monetary policy reports and meeting minutes suggested that central bankers in China were not worried about deflation. They added that officials seemed confident about a rebound in inflation. The economists further commented that they anticipated inflationary pressure to increase as the output gap shrinks in the second half of 2023, especially with the start of a new credit cycle.