China Inflation Ticks Higher In May
A surge in China’s trade and moderate inflation data has given extra evidence that the country’s economy was solid in May, underlining the readings from the two start of the month manufacturing surveys.
Further reports this week on Chinese economic activity data (out Thursday) are expected to show a slowing in industrial production to 6.8% year on year, investment growth unchanged at 7% (and watch the level of real estate investment especially) while the AMP’s Chief Economist, Dr Shane Oliver sees retail sales growth picking up to 9.7%.
Weekend figures showed China’s producer inflation picking up for the second month in a row to a four-month high in May thanks to stronger commodity prices (which boosted the value of imports as well).
The producer price index rose 4.1% in May from a year earlier, bolstered by higher commodity prices and up from a lower base last yea. According to the China’s National Bureau of Statistics that compared with the 3.4% rise in April.
Another report from the National Statistics Bureau showed that the profits of Chinese industrial firms rose at their fastest pace in six months in April, with earnings for iron and steel processing firms jumping 260%.
The trade data for May showed that growth in China’s exports slowed less than expected in months, but imports rose at the fastest pace since the start of the year (when they were boosted by pre-ordering ahead of the Lunar New Year holiday break).
Exports were up 12.6%, slightly lower than the 12.9% jump in April, but well short of market forecasts for a 10% rise. Imports also outperformed in May, accelerating to a year-on-year rise of 26% from 21.5% a month prior.
The faster growth in imports helped trim China’s trade surplus to $US24.9 billion in May, down from a revised level of $US28.4 billion (previously $US28.8 billion) in April.The trade gap with the US rose to $US24.6 billion, making up almost all of the total surplus of $24.9 billion.
ASEAN, EU and Korea ranked the top three exporting countries to China in May. It is the first time that Korea has replaced Japan to be the third largest exporting country.
Emerging economies made solid contributions to Chinese exports. Exports to Brazil, Vietnam, Indonesia and Russia reported annual increases respectively of 37.9%, 27.1%, 20.7% and 20.5%.
Imports from the US slowed down to 11.4% from 20.4% in April, though China has said it will take efforts to increase imports from America during the latest trade talks.
China’s exports in May rose to $US212.87 billion.
The 26% surge in imports in May was due mostly to higher prices for commodities such as oil and gas, copper, lead and coal. Bloomberg reported there was also a solid rise in imports of computer chips.
China is reported to be importing record volumes of US oil and is likely to buy more US soy after Beijing signalled to state-run refiners and grains purchasers they should buy more to help ease trade tensions.
Bloomberg reported that among major trading partners, China’s imports from Australia saw biggest turnaround in growth in May, rising 22.4% year-on-year after falling 3.1% in April. Imports from South Korea rose 31.8% in May.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.