By Michael Hewson (Chief Market Analyst at CMC Markets UK)
- China Trade and CPI (Aug) – 07/09 and 09/09 – over the past few weeks China has taken several measures to help boost the economic prospects for its economy and has continued to do so on a piecemeal basis. From easing overseas travel restrictions to modest cuts to lending rates, concern has increased about the prospects for the Chinese economy. In July, the economy slipped into deflation after headline CPI fell from 0.2% in June to -0.3%. PPI, which has been in deflation since the end of last year improved slightly but still declined by -4.4%. This didn't come across as a surprise given how poor the July trade numbers were. Markets had been expecting some poor numbers so expectations were low, however we still managed to see a surprise in that they were even worse than expected. The last 2 months of Q2 saw sharp declines in exports, with a -12.4% fall in June. There was little let-up in the July numbers with a bigger than expected decline of -14.5%, the worst performance since February 2020, with global demand remaining weak. Imports have been little better, with negative numbers every month this year, and July was no different with a decline of -12.4%, an even worse performance from June's -6.8%, with all sectors of the economy showing weakness. As we look toward the August numbers, expectations are already low given the relatively low levels of support put forward by Chinese policymakers this past month and the concerns over the real estate sector. Expectations are for exports to decline by -7.8% and imports to decline by -8.8%.
