Via Capital Economics:
• Import growth was surprisingly strong last month. This probably reflects a continued recovery in industrial activity following the easing of winter pollution controls and is unlikely to be sustained. Meanwhile, with global growth now past its peak, Chinese export growth is trending down. But progress in US-China trade negotiations raises hopes that a sharp downturn in shipments can be avoided.
• Export growth edged down from 3.7% y/y in April to 3.2% last month in renminbi terms (the Bloomberg median was 1.6%, our forecast was 2.0%). (See Chart 1.) Adjusting for seasonality and price effects, we estimate that export volumes rose 0.9% m/m in May. (See Chart 2.) The upshot is that there appears to have been an uptick in foreign demand last month, consistent with the improvement in the export orders component of the manufacturing PMIs. Nonetheless, shipments remain a fair bit softer than at the start of the year and a broad downtrend in export growth remains in place. The slowdown in export growth during the past year can be partly explained by renminbi’s trade weighted appreciation. (See Chart 3.)
