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China’s export slowdown to continue in 2019
Published:2018-12-15   Have been here 144   Source:泓威国际物流

Slowing Chinese export growth in November could be followed by a sharp slowdown next year, according to investment bank Nomura, impacting ocean and air freight volumes, especially on the eastbound transpacific trade.

China’s export growth in US dollar terms plummeted to just 5.4% year-on-year in November from 15.5% in October, far lower than both the consensus expectations of almost 10% growth and 2018 average export growth of 12.6% over the first ten months of the year.

Import growth also decelerated to just 3%, year on year in November from 20.8% in October.

“The sharp slowdown in exports was broadly based, pointing to weakening external demand and the tapering effect of frontloading, while the slump in import growth might point to a weaker Chinese economy,” said Nomura.

China’s November export numbers also illustrated how important the US market has been in terms of export demand this year, with demand from several other key markets falling away at a faster rate than to the US.

Growth of exports to Japan and the EU in November declined to 4.8% year-on-year and 6%, respectively, from 7.9% and 14.6% in October, while export growth to ASEAN, South Africa, Russia and Brazil slowed to 5.1%, -2.8%, 2.9% and -8.8% in November from 13.7%, 8.7%, 16% and 22.8% in October, respectively.

Export growth to the US last month slowed to 9.8% year-on-year from 13.2% in October, slightly below the average growth of 13.3% over the first ten months of 2018, noted Nomura. Growth of imports from the US slumped to -25.0% year-over-year from -1.8% in October.

“As a result, the trade surplus with the US widened to $36bn in November from $32bn in October, with the year-to-date surplus of $295bn higher than the $252bn surplus over the same period last year,” added the analyst.

Nomura said the US-China 90-day trade truce could extend the frontloading on the transpacific trade until the end of next year and predicted “a small rebound in trade growth in December”. But a slump in growth to the US was likely by the second quarter.

“Growth of exports to the US slowed (in November), but to a lesser degree than headline export growth,” said the analyst. “Front-loading activity seemed to start easing in late November, evidenced by lower freight rates for China’s US-bound cargo, as it takes some time for shipments from China to the US and the effective date for tariff hikes from 10% to 25% on the $200 billion list was previously scheduled on 1 January 2019 before the Trump-Xi meeting at the G20 Summit.

“Besides, front-loaded shipment of products for the Christmas season may be concentrated in September and October, and hence may also weigh on export growth in November and December.”

Nomura argued that given the 90-day truce for further trade negotiation between China and the US, front-loading would likely linger over the next three months, which should provide some support for export growth. “However, the downtrend of export growth will most likely continue in medium to long term,” it added.

Promisingly for lines operating on transpacific westbound trade keen to reposition equipment, Nomura also expects export growth from the US to China to pick up in December, as “President Xi pledged to increase imports from the US, especially on agricultural and energy products, and Beijing may soon take some action”.

However, China’s official manufacturing PMI, which reflects sequential growth momentum, fell to the expansion-contraction threshold of 50.0 in November from 50.2 in October. By component, the new orders sub-index fell to 50.4 in November from 50.8 in October, while the production sub-index dipped to 51.9 from 52.0.

“The new export orders sub-index edged up to 47.0 from 46.9 in October, still far below the 50 threshold, pointing to more challenges to export growth once front-loading fades,” added Nomura.

As reported yesterday in Lloyd’s Loading List, The frontloading of US imports from China in a bid to beat China-US tariffs next year are forecast to see record US container imports this quarter. The latest Container Trade Statistics data revealed that headhaul transpacific volumes in October rose 7.4% year-on-year to 1.62m teu, giving lines and forwarders a healthy boost as the traditional peak season was extended into the fourth quarter (Q4).

And the latest US port figures support the trend noted by CTS. The monthly Global Port Tracker report produced by the National Retail Federation and Hackett Associates recorded record US box imports in October at retail ports and predicted further substantial year-on-year gains in November and December. Jonathan Gold, NRF vice president for supply chain and customs policy said that although President Trump has declared a temporary truce in the trade war, these imports came in before the announcement was made.

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