On Tuesday (09/May), the China's National Bureau of Statistics released its trade data. It was recorded that an 8.5 percent increase occured in exports on an annual basis in April.
This figure managed to exceed the projection of 8.0 percent and continued the positive trend from the previous period. In terms of volume, exports last month reached US $ 295.42 billion.
Most exports come from the shipments of manufactured goods and automotive components. One of them is electric car (EV) battery shipments which jumped by 54.8 percent in the first quarter of 2023.
China's rapid surge in EV battery shipments is in line with the growing popularity of electric cars in many countries. However, analysts estimate that China still needs more time to be able to dominate the world electric car market.
Global Economic Condition may Affect the Export Sector
On the downside, China's export outlook has the potential to experience a slowdown due to the trend of moving the clothing and furniture industry. The plan is to move them to Mexico and parts of Southeast Asia.
Analysts also warned that global economic conditions that are being overshadowed by the risk of a slowdown could hit that country’s export sector.
The slowing pace of China's economic recovery at the beginning of the second quarter of this year could also weigh on the domestic demand outlook in the months ahead. Meanwhile, the imports last month slumped by 7.9% from a year earlier.
This figure was worse than the expectations of a 5.0% decline and a free fall from a 1.4% decline in the previous period. China's import sector has been in negative territory for the past few months.
China’s Import is Experiencing the Biggest Drop
In fact, China's imports fell by 21.4 percent in January. This is the biggest drop since March 2020 where that time was the beginning of the COVID pandemic.
The increase in exports that was not followed by an increase in imports made the trade balance surplus increase from US $ 88.19 billion to US $ 90.21 billion in April.
This figure was better than the expectations of economists who had expected a surplus of US$71.6 billion only. Elsewhere, the US dollar index or DXY continued its sideways movement.
It was in the central area between 101.00-102.00 in trading on Wednesday (10/May). Meanwhile, the major currency pairs fluctuated in limited ranges.
US Inflation Data Release Pressured the Dollar
The release of United States inflation data reinforced speculation that the Fed's interest hike last week was the last in this year. That situation was putting pressure on the US dollar rate.
On the other hand, the issue of the American debt ceiling prevented a sharper weakening of the USD exchange rate. This was anticipated by some market participants.
The Growth in core data as well as inflation release for all groups of goods and services in the US both increased by 0.4%. This was for month-over-month in April 2023, in line with market expectations.
Core inflation on an annual basis corrected from 5.6% to 5.5%, while inflation for all goods groups fell from 5.0% to 4.9%. Overall data indicate that inflationary pressures are weakening.
Tight Monetary Policy is Widening
The impact of the Fed's tight monetary policy since last year has been widening in the economy. That is why; the American central bank may not need to raise interest rates again.
The today’s American inflation data is in line with expectations and does not change the experts'view that the Fed has now paused its rate hikes. This was stated by said Karyne Charbonneau.
The market initially responded to the announcement of US inflation data by boosting Wall Street stocks and releasing the USD. The Treasury bond yields also slipped slightly.
However, market movements soon moderated again due to the continued heating of the US debt ceiling issue. President Joe Biden and the American political elites have yet to reach an agreement to raise the government's debt ceiling in negotiations earlier this week.
