According to customs data released on Wednesday, China experienced its first decline in exports since February. In May, exports dropped by 7.5% compared to the previous year, reaching a total of $283.5 billion.
This decline greatly exceeded the predictions of a Reuters poll, which had anticipated a more modest 0.4% decrease.
Julian Evans-Pritchard, Head of China Economics at Capital Economics, noted that the decline was so significant that export volumes fell below their levels at the beginning of the year, even when accounting for seasonality and changes in export prices.
“This points to subdued global demand for Chinese goods,” he said.
Despite slightly surpassing expectations with 8.5% year-on-year growth in April, China’s export performance took a disappointing turn in May.
This downward trend suggests a longer-term decline, according to Hao Hong, Chief Economist at Grow Investment Group.
Hong emphasizes that China cannot rely on trade to stimulate its economy for at least another six months. Lackluster U.S. demand, coupled with high inflation and interest rates, is creating a drag on China’s export prospects.
China’s imports in May registered a 4.5% decline compared to the previous year, totaling $217.69 billion. This decrease was less severe than the anticipated 8% plunge predicted by Reuters.
Notably, China has been experiencing year-on-year declines in monthly imports since late last year.
However, there are indications of recovery in domestic demand, as suggested by other analyses of the data.
Julian Evans-Pritchard from Capital Economics estimated that import volumes in May reached an 18-month high when considering a lower base of comparison and price changes.
He further predicts that imports will continue to recover in the coming quarters due to the ongoing effects of reopening.
Unfortunately, a detailed breakdown of China’s trade for May in terms of country or category, denominated in U.S. dollars, is not immediately available.
On another note, China is scheduled to release inflation data on Friday, which will provide further insights into the country’s economic situation.