China: Import growth slumps in January - Nomura

FXStreet (Bali) - According to Nomura Economists, the much weaker-than-expected import data in China over the weekend not only reflects the fall in commodities prices but also implies weakening domestic demand.

Key Quotes

"Exports contracted by 3.3% y-o-y in January from a rise of 9.7% in December, much weaker than the expected growth (Consensus: 5.9%; Nomura: 2.5%). Imports slumped by 19.9% y-o-y in January after a decline of 2.4% in December, well below expectations (Consensus: -3.2%; Nomura: -5.0%), resulting in a record-high trade surplus of USD60.0bn."

"The weak trade data in January is in line with the official PMI which fell below the expansion/contraction threshold of 50, suggesting weakening growth momentum. We maintain our view of GDP slowing to 7.1% y-o-y in Q1 from 7.3% in Q4, and expect more monetary policy easing ahead."

"The weak export data in January is in line with the decline in trend exports from South Korea, highlighting the downside pressures on external demand. The much weaker-thanexpected import data not only reflects the fall in commodities prices but also implies weakening domestic demand. Today’s trade data is consistent with the weak official PMI released on 1 February and we maintain our view of growth slowing to 7.1% y-o-y in Q1 2015 from 7.3% in Q4 2014."

"The authorities are also concerned about weak growth momentum, as evidenced by the 50bp cut in banks’ reserve requirement ratio (RRR) by the People’s Bank of China on 4 February. We view that cut as much needed and just the beginning of a series of further monetary easing measures."

"We continue to expect three more RRR cuts, one in each of the remaining quarters of 2015, and one 25bp benchmark interest rate cut in Q2. Despite the step-up in policy easing, we expect GDP growth to slow to 6.8% in full-year 2015, due to deep-rooted domestic challenges such as the property market correction, tighter controls over local government debt and deleveraging."