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Chinese Trade Data Confirms Growth Worries

From Market Watch:


China’s trade surplus widened in May to $20.43 billion from $18.16 billion in April.
Exports rose 1.0% in May from a year earlier, data from the General Administration of Customs showed Saturday. This was much slower than April’s 14.7% rise and below the economists’ median forecast of a 5.6% expansion
Imports fell 0.3% from a year earlier, compared with a 16.8% rise in April and missing the economists’ median forecast of a 5% increase.


Although at first reading, the increase in trade surplus seems to be a good signal for Chinese growth, this is not the case. The fact is that exports posted their lowest growth rate in almost a year in May while imports unexpectedly fell.
These data traduce weakness in domestic demand because of slowdown in consumption and investment but also sluggish global demand due to the impact of sizeable exchange rate appreciation.

China PMI Composite Signaled Slowdown in May

This morning, HSBC & Markit published both Services and Composite PMI for May. A reading above 50 indicates expansion.


The services activity which accounted for 46% of China’s GDP in 2012 stabilized at relatively low level of growth in May. Indded, the PMI for the services industry inched up to 51.2, the second lowest reading since August 2011.


Taking into account the manufacturing activity, the Composite PMI suggested only a slight expansion in May as the index posted 50.9 down from 51.1 in April. It indicated the weakest expansion since last October.


From the HSBC & Markit:


“Business activity at service providers increased at a modest pace. The latter was signaled by the HSBC China Services Business Activity Index, which posted 51.2 in May. This was broadly unchanged from April’s 51.1 and was one of the lowest readings in the series history”…”HSBC China Composite HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled only a slight expansion of output during May. The HSBC China Composite Output Index pos ted 50.9, and down from 51.1 in April, indicated the weakest expansion in business activity since last October.”


These two surveys add dome concerns over the loss of momentumm recorded since the beginning of the year. Remind that in Q1 2013, GDP slowed to 7.7% YoY down from 7.9% in Q4 2012. Note that fortunately, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC saw some supportive factors in the coming months:


“The improving property market and Beijing’s renewed effort on expanding VAT tax reform nationwide could lend some support for the service sector’s future development.”

Finally, trade balance, industrial production, and retail sales for May will be published later this week.