China Exports Decline Unexpectedly, Trade Balance Negative

In yet another downside surprise, China February Exports Tumble Unexpectedly.

China's exports unexpectedly tumbled in February, swinging the trade balance into deficit and adding to fears of a slowdown in the world's second-largest economy despite the Lunar New Year holidays being blamed for the slide.

The sharp drop in exports follows a series of factory surveys since the start of 2014 that point to weakness in economic activity as demand falters at home and abroad.

Exports in February fell 18.1 percent from a year earlier, following a 10.6 percent jump in January, the General Administration of Customs said on Saturday.

Imports rose 10.1 percent, yielding a trade deficit of $23 billion for the month versus a surplus of $32 billion in January.

That compares with market expectations in a Reuters poll of a rise of 6.8 percent in exports, an 8 percent rise in imports and a trade surplus of $14.5 billion.

Analysts cautioned against reading too much into single-month figures for January or February, given possible distortions caused by the long Lunar New Year holiday, which began on January 31 and covered early February. Many plants and offices shut for extended periods during the festival.

Still, combined exports in January and February fell 1.6 percent from the same period a year earlier, versus a 7.9 percent full-year rise in 2013. Imports rose 10 percent year-on-year in the first two months, compared with a 7.3 percent rise in 2013.

Exports to the United States edged up 1.3 percent in the first two months from a year earlier, while sales to the European Union rose 4.6 percent, according to official data.

CONFIDENT ON OUTLOOK

China's trade outlook is widely expected to be rosier this year in line with a recovery in developed countries. Minsheng Securities' Li said he expected exports to pick up in March.

Expect More Downward Surprises

Why everyone expects a rosy global economic forecast led by the US, Europe, and developed countries in general is a mystery. I expect more downward surprises of all sorts.

China Overtakes US in Trade

By the way, back in January, the Financial Times reported China Overtakes US as World’s Largest Goods Trader.

China became the world’s biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December.

Coming fast on the heels of China taking over as the world’s largest oil importer, the shift is another milestone as the country takes its place among the world’s most powerful nations. Trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US, still the world’s largest economy.

The total value of China’s imports and exports in 2013 was $4.16tn, a 7.6 per cent increase from a year earlier on a renminbi-adjusted basis, according to figures released by the Chinese government on Friday.

The US will release its full-year figures in February but its total imports and exports of goods amounted to $3.57tn in the 11 months from January to November 2013, making it a virtual certainty that China is now the world’s biggest goods trading nation.

The country became the world’s biggest goods exporter in 2009 and Chinese imports and exports now account for more than 10 per cent of global goods trade, up from just 3 per cent in 2000.

Iron ore imports grow

It was a single cargo of iron ore arriving in Shandong Province on December 19 that pushed China’s total trade for 2014 over the milestone $400bn mark, turning the nation into the world’s largest trader of goods for the first time in centuries.

“Consensus expectations for Chinese steel demand and production are too low,” said Christopher LaFemina of investment bank Jefferies, who argued that China’s steel production would not peak for another decade due to continued demand from growing cities.

In spite of obvious malinvestments in vacant cities, vacant malls, unused rail systems, etc., LaFemina thinks the boom will not peak for another 10 years. Amazing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com