SUMMARY
- China's exports took an unexpected 7.5% nosedive in May, first since February.
- Analysts predict a subdued global demand for Chinese goods, with the US and EU markets exhibiting a significant slump.
- Imports in May dipped by 4.5%, but showed signs of domestic demand recovery.
China's bustling economic engine witnessed an unexpected hiccup in May, as exports took a downward plunge for the first time since February, thereby raising red flags around the future momentum of the world's second-largest economy.
A yawning gap between actual figures and projections startled the market when exports deflated by 7.5% on a yearly basis, amounting to $283.5 billion, a sharp contrast to the mere 0.4% decline predicted by a Reuters poll. The dip was so pronounced that export volumes slid beneath their start-of-the-year levels, even after adjusting for seasonal fluctuations and alterations in export prices, as per Julian Evans-Pritchard, Head of China Economics at Capital Economics.
His analysis indicates a dampened global appetite for Chinese merchandise. "We're seeing signs of subdued global demand for Chinese goods," he explained.
A month prior, China had defied the odds, recording a notable 8.5% year-on-year growth in exports, thus outpacing forecasts. However, May's dismal figures hint towards a downturn in the long-run trend, according to Hao Hong, Chief Economist at Grow Investment Group. He suggests that it is unlikely for China to rely on trade as an economic propellant in the coming six months, given the lackluster demand from the US, where inflation and interest rates continue to remain elevated.
In line with this, customs data published on Wednesday revealed a slump in the dollar value of China's exports to the US by 15.1% compared to last year. Exports to the European Union also dipped by 4.9%. On the brighter side, exports to the ASEAN region showcased a growth of 8.1% in dollar terms from the previous year. Meanwhile, imports for May dropped by 4.5% from a year ago to $217.69 billion, showing a milder downturn than the 8% plunge forecasted by Reuters.
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