Deciphering economic data amid the Covid-19 carnage is like pogoing across a minefield. And when it comes to China, there are usually pieces of shrapnel in the air.
On Thursday, the country’s export numbers for April created a few fireworks, but there were also one or two bombs. Imports imploded while the Caixin/Markit Purchasing Managers’ Index for the services sector dropped below the radar.
“Monthly trade numbers are volatile in the best of times, and even more so now because of the Covid-19 pandemic. So we wouldn’t read too much into these,” Trivium China, the research group, said in a note.
Data released by the General Administration of Customs showed exports jumped 3.5% last month compared to the same period in 2019. It was the first sign of positive growth since December last year. A forecast of analysts by Bloomberg had predicted an 11% decline.
Still, the rise was fuelled in part by shipments of medical equipment, including traditional Chinese medicine and textiles, which include masks. The customs agency reported the sector was worth 71.2 billion yuan, or US$10.03 billion, to Chinese manufacturers during the period between March-April.
Overall, exports of medical instruments and devices jumped 11% in the first four months compared to the same period last year.
“April shipments may [also] have been boosted by exporters making up for shortfalls in the first quarter due to supply constraints then,” Louis Kuijs, the head of Asia economics, at the research group Oxford Economics, said in a note.
Concerns were also raised by Nick Marro, the lead analysts on global trade at The Economist Intelligence Unit, after imports plunged by 14.2% last month, year-on-year.
In turn, China’s trade surplus with the United States swelled to about $22.8 billion in April or 8.8% from 12 months ago.
“Shipments from the US remain well below the levels needed to achieve the purchase pledges under the [phase one] trade accord … with the deterioration in US-China ties, there’s a risk that the US might act brashly,” Marro said.
Major markets in Europe and the United States are still struggling with the aftershocks of the Covid-19 crisis, derailing industrial production. Even now, there are forecasts of a deep recession in the West when business activity finally picks up again.
“Not only was global demand taking a hit from the coronavirus, but the shock to the production side was actually more pronounced last month,” Nie Wen, an economist at Hwabao Trust, an asset management firm in Shanghai, said.
“But I’m particularly worried about the slump in foreign demand – the impact will only be fully felt later on as world factories reopen,” Nie Wen told the Reuters news agency.
Closer to home, the Caixin/Markit services sector PMI inched higher at 44.4 last month compared to 43 in March but it was still in contraction territory. A figure above 50 illustrates growth.
More importantly, services generate tens of millions of jobs and account for around 60% of the world’s second-largest economy.
“Employment in the services sector contracted at the fastest pace on record. The measure for employment hit its lowest level since the survey began more than 14 years ago,” Zhengsheng Zhong, the director of macroeconomic analysis at CEBM Group, said.
“China will work to bail out services companies hit hard by the pandemic, as policymakers have made stabilizing employment their top priority. Bigger tax and fee cuts are urgently needed,” Zhong added in comments that came with the PMI report.
At least, monthly auto sales increased for the first time in almost two years with two million vehicles shipped to dealerships and stores in April, a 0.9% rise compared to the same period last year.
“That was the first increase since June 2018. However, deliveries dropped about 32% in the first four months to 5.67 million units,” the China Association of Automobile Manufacturers said in a statement.
Even so, the road ahead still appears strewn with economic bomb craters.