China’s exports and imports unexpectedly contracted in October, the first simultaneous slump since May 2020, as rising inflation and rising interest rates weighed on global demand, while fresh domestic COVID-19 restrictions disrupted production and consumption.
The dismal October trade numbers highlight the challenge for policymakers in China as exports were one of the few bright spots in the struggling economy.
Outbound shipments fell 0.3% in October from a year earlier, a significant reversal from a 5.7% rise in September, official data showed on Monday and far below analysts’ expectations for a 4, 3% It was the worst performance since May 2020.
The data suggests that overall demand remains weak, adding pressure on the country’s manufacturing sector and threatening any meaningful economic pickup amid ongoing COVID-19 restrictions, continued real estate weakness and global recession risks.
Chinese exporters were not even able to benefit from further weakness in the yuan currency and the important year-end shopping season, underscoring the mounting strains on consumers and businesses worldwide.
“Weak export growth likely reflects both weak overseas demand and supply disruptions due to COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing COVID disruptions at the Foxconn factory, a major Apple supplier, in Zhengzhou an example.
Apple (AAPL) said it expects lower-than-expected shipments of high-end iPhone 14 models after a major production cut at a virus-hit factory in China.
“Looking ahead, we expect exports to continue to decline in the coming quarters. The shift in global consumption patterns that has boosted demand for consumer goods during the pandemic is likely to weaken further,” said Zichun Huang, economist at Capital Economics.
“We believe that aggressive tightening of financial markets and the drag on real incomes from high inflation will push the global economy into recession next year.”
Nearly three years into the pandemic, China has maintained strict COVID-19 containment policies that have taken a heavy economic toll and caused widespread frustration and fatigue.
Weak factory and trade numbers in October suggested the world’s second-largest economy was struggling to emerge from the quagmire in the final quarter of 2022 after reporting a faster-than-expected recovery in the third quarter.
Chinese leaders last week pledged to prioritize economic growth and push ahead with reforms to allay fears that ideology may prevail as President Xi Jinping inaugurated a new term and disruptive lockdowns continued without a clear exit strategy in place view was.
Sluggish domestic demand, weighed down by new COVID restrictions and lockdowns in October and the cooling real estate market, also hurt imports.
Inbound shipments fell 0.7% from a 0.3% rise in September and came in below a forecast 0.1% rise – the weakest result since August 2020.
China’s soybean imports fell and coal imports slid as strict pandemic measures and a real estate slump disrupted domestic production.
The overall trade numbers resulted in a slightly larger trade surplus of $85.15 billion compared to $84.74 billion in September, missing a forecast of $95.95 billion.