Econintersect: The world is keeping a watchful eye on the Chinese economy 
and the latest data is not giving much reassurance that the slowdown so far in 2012 is necessarily over. China managed a respectable trade surplus of $26.7 billion, but is was only partly due to a modest increase of exports in August of 2.7% compared to one year earlier. The rest of the trade surplus came from an unexpected decline of 2.6% in imports. This was the first decline in imports not associated with a holiday since the Great Recession year of 2009.
A decline in imports is a possible sign of further slowing yet to come for the Chinese economy. China is struggling with domestic slowing combined with much of its major market in Europe going into recession. A policy response is anticipated from the Chinese government, as discussed by Bloomberg:
The data increase pressure on Chinese Premier Wen Jiabao to roll out more stimulus to support growth after reports yesterday showed industrial production slowed further and producer-price declines accelerated. Bank of America Corp. and UBS AG forecast economic expansion will decelerate this quarter for a seventh straight period.
China also reported the slowest Industrial Production (IP) growth since May 2009 over the weekend. With year-over-year growth of 8.9% IP continued a decline that has been progressing for much of the year.
The strong disinflation seen this year was halted with the announcemnt that the August CPI (Consumer Price Index) was up 2.0% year-over-year. This was up from 1.8% growth in July. The increase was driven primarily by food prices, up 3.4% in August compared to 2.4% in July.
At the producer wholesale level the deflation that has gripped China this year constinued with the PPI (Produce Price Index) registering at decline from August last year of 3.4%, even greater than the 2.9% year-over-year decline in July. The last time the PPI was positive was January of this year. See GEI News.
Sources:
- China Imports Unexpectedly Drop as Exports Rise Less Than 3% (Bloomberg News, 09 Spetember 2012)
- China Economy Shows More Frailty (Aaron Back and Tom Orlik, The Wall Street Journal, 10 September 2012)
- China: Prices Falling Off a Cliff, Trade Balance Unexpectedly Positive (GEI News, 10 July 2012)
