China: March trade data preview – ING

Tim Condon, Chief Economist at ING, suggests that the export growth deceleration in 1Q16 made China an underperformer, which undermines an argument the authorities have used against a CNY devaluation.

Key Quotes

“March trade data are due tomorrow. The 10.0% YoY consensus forecasts for export growth would make it the first positive print since June 2015. It’s not that growth is breaking to the upside but rather that exports were unusually weak in March 2015.

However, even if the consensus forecast materializes export growth will have slowed for a third time since 2015 in early 2016. From a steady 7.5% in 2012-14 it slowed to -0.5% in January-July 2015, then to -4.8% in August-December 2015 and, based on the consensus forecast, to -10.0% in January-March 2016.

The third step down in export growth is unusual to China; there wasn’t one in Korea or Taiwan. Based on the consensus forecast China’s USD value exports in March would be 19% below their 2014 average vs. 10% for Korea’s and 13% for Taiwan’s. The pronounced export weakness underscores that domestic spending is behind the 6.7% GDP growth the consensus is forecasting for 1Q16 (data due Friday).

China’s export growth was in line with that of its neighbours in 1Q16. However, the growth deceleration in 1Q16 made it an underperformer, which undermines an argument the authorities have used against a CNY devaluation.”