Chinese Data Shows A Disappointing Trend
For early morning traders on Monday, there is likely to be some volatility in the Australian and New Zealand currencies after disappointing trade figures from China. Over the weekend there were two major economic data releases from the Chinese. Saturday morning saw China’s exports unexpectedly tumbled in February, swinging the trade balance into deficit and adding to fears of a slowdown in the world’s second-largest economy despite the Lunar New Year holidays being blamed for the slide. Just last week Premier Li Keqiang set this year’s economic-growth target of 7.5 percent. With exports falling the government will have a difficult meeting those projections stirring fears in the economic markets. The significant drop in exports follows a slew of factory surveys since the start of 2014 that point to weakness in economic activity as demand falters at home and abroad. Exports in February fell 18.1 per cent from a year earlier, following a 10.6 per cent jump in January, the General Administration of Customs said today.
Li also set a target for consumer inflation of about 3.5 percent this year, the same as in 2013, and a goal of 7.5 percent for growth in foreign trade. The consumer price index rose 2 percent in February from a year earlier, a 13-month low, data from the National Bureau of Statistics showed yesterday.
The slightly different timing of the Chinese New Year holidays between 2013 and 2014 helped boost January CPI and smooth February’s reading. Consumer inflation rose at its slowest since January last year, but didn’t fall below 2% as some analysts had predicted. Inflationary pressure is one problem that the Chinese government hasn’t had to deal with in recent months, allowing the goals of monetary policy to be recalibrated in order to tackle the excesses of the financial system. The PBOC said in its latest monetary policy report that “price conditions are largely stable,” replacing the previous wording that “upward pressure on prices remain”. Market interest rates have been allowed to fall in recent weeks in a signal that the bank is satisfied with domestic monetary conditions. The government set the inflation target this year again at around 3.5%, though the January-February prices remain well below that level.
PBOC Director Zhou Xiaochuan will give a briefing on March 11 and Premier Li will hold a press conference on March 13. Subdued inflation below the government’s 2014 target will give the central bank more room to ease liquidity and maintain lower money-market interest rates.
A resilient Chinese economy is good news for the world, particularly for major commodity exporters such as Australia.
China’s crude oil imports in the first two months of the year rose 11.5 per cent from a year earlier, while imports of copper jumped 41.2 per cent and iron ore shipments rose 21.8 per cent, data from the customs administration showed. Traders should keep a close eye on the Aussie dollar, and copper along with oil prices early on Monday.