China: Trade balance shrinks, CPI rises strongly - TDS

Analysts at TD Securities note that China’s Aug export growth of 9.8%/y (mkt 10%/y) and import growth of 20%/y (mkt 17.7%) shrunk the trade balance to $US27.9b (mkt $US31b).

Key Quotes

“Going forward, we see risks skewed to the downside as we expect import growth to remain generally more stable than exports, which may begin to feel pressure from tariffs and generally softer global growth. The 12m surplus with the US rose to $301.4bn (yet another record high).”

“The US administration is not going to like these numbers and the data will do little to alleviate concerns about the imposition of fresh tariffs. Meanwhile China’s surplus with Asia ex-Japan continues to narrow, dropping to $48.3bn, the lowest since October 2013 while the trade surpluses with the EU and deficit with Japan remain relatively flat at $131.3bn and -$36.0bn.”

“At the margin China’s CPI will give further reason for China to try to maintain CNY stability (in trade weighted terms). CPI rose more than expected, while PPI dropped from the previous month but was still higher than consensus. CPI rose to 2.3% y/y in August from 2.1% y/y previously while PPI rose 4.1% y/y from 4.6% y/y previously.”

“PPI is likely to pick up pace given the increase in infrastructure spending. CPI has risen to its highest since February. While the data is unlikely to stop further targeted easing it does provide further reason (in addition to reducing leverage) for the PBoC to avoid broad policy easing.”