China's Exports Miss forecasts as Lone Bright Spot Fades

Employees work on solar photovoltaic modules that will be exported at a factory in Lianyungang, in China's eastern Jiangsu province on January 4, 2024. (Photo by AFP)
Employees work on solar photovoltaic modules that will be exported at a factory in Lianyungang, in China's eastern Jiangsu province on January 4, 2024. (Photo by AFP)
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China's Exports Miss forecasts as Lone Bright Spot Fades

Employees work on solar photovoltaic modules that will be exported at a factory in Lianyungang, in China's eastern Jiangsu province on January 4, 2024. (Photo by AFP)
Employees work on solar photovoltaic modules that will be exported at a factory in Lianyungang, in China's eastern Jiangsu province on January 4, 2024. (Photo by AFP)

China's export growth slowed sharply in September while imports also unexpectedly decelerated, undershooting forecasts by big margins and suggesting manufacturers are slashing prices to move inventory ahead of tariffs from several trade partners.

Last month, export momentum had been one bright spot for the Chinese economy that has struggled to gain traction due to weak domestic demand and a property market debt crisis, adding to the urgency for stronger stimulus.

Outbound shipments from the world's second-largest economy grew 2.4% year-on-year last month, the slowest pace since April, customs data showed on Monday, missing a forecast 6.0% increase in a Reuters poll of economists and a 8.7% rise in August.

Imports edged up 0.3%, missing expectations for a 0.9% rise and softer than 0.5% growth previously.

The weak data does not bode well for exports in coming months as just under a third of China's purchases are parts for re-export, particularly in the electronics sector.

The European Commission on Oct. 4 saw its motion to impose additional duties on electric vehicles built in China of up to 45% pass in a divided vote of EU member states, joining the US and Canada in tightening trade measures against China.

China's overall trade surplus narrowed to $81.71 billion in September from $91.02 billion in August and missed a forecast of $89.80 billion.

China's trade surplus with the United States narrowed to $33.33 billion in September from $33.81 billion in August, customs data showed on Monday.

Manufacturing activity shrank sharply in September, according to a recent factory owners' confidence survey, with new export orders falling to their worst in seven months.

Analysts have attributed previous months' strong export performance to factory owners slashing prices to find buyers.

Analysts anticipate it will take a long time to restore consumer and business confidence and get the $19 trillion economy on a more solid footing. A housing market recovery, in particular, could be a long way off.

That said, China's iron ore imports rose 2.9% last month year-on-year, partly on hopes for improved demand over September and October, the peak construction season, while the country's copper imports climbed from a month prior too.

New bank lending in China missed forecasts in September, separate data released by the People's Bank of China showed, although household loans, including mortgages, rose to 500 billion yuan in September from 190 billion yuan in August, according to Reuters' calculations.



Bank of Israel Keeps Rates on Hold as Inflation Stays Just Above Target Range

The Bank of Israel building in Jerusalem - Reuters
The Bank of Israel building in Jerusalem - Reuters
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Bank of Israel Keeps Rates on Hold as Inflation Stays Just Above Target Range

The Bank of Israel building in Jerusalem - Reuters
The Bank of Israel building in Jerusalem - Reuters

The Bank of Israel left short-term interest rates unchanged on Monday citing "geopolitical uncertainty" and saying inflation remained above the target range despite it easing in May.

The central bank left its benchmark rate at 4.50% for the 12th meeting in a row.

"In view of the geopolitical uncertainty, the interest rate path will be determined in accordance with the convergence of inflation to its target range, stability in the financial markets, economic activity, and fiscal policy," the bank said in a statement announcing the decision, Reuters reported.

Its last move was to reduce the rate by 25 basis points in January 2024 after inflation eased and economic growth slowed in the early days of the Gaza war. It has kept policy steady since then and said it is in no rush to ease again while inflation remains above target.

Ten of 11 analysts polled by Reuters had expected no rate move on Monday. One predicted a 25 bps rate cut due to the end of a 12 day Israel-Iran war that saw Israel's risk premium slide and the shekel appreciate sharply.

The annual inflation rate eased to 3.1% in May from 3.6% in April but remained above the government's 1-3% annual target.

The bank said that it forecast inflation would ease to within its target range in coming months and be around the midpoint of that range in a year's time.

However, it noted that risks remained that could affect the inflation outlook.

"In the Committee’s assessment, there are several risks for a possible acceleration of inflation or for it not converging to the target range: geopolitical developments and their impact on economic activity, an increase in demand alongside supply constraints, and worsening global terms of trade," the bank said.

The economy grew by an annualised 3.7% in the first quarter after a 1% expansion for all of 2024 due to the war.

Economic uncertainty has lingered due to the 21-month-old conflict between Israel and Palestinian group Hamas in Gaza.

Israeli Prime Minister Benjamin Netanyahu is due to meet with US President Donald Trump at the White House on Monday, while Israeli officials hold indirect talks with Hamas, aimed at a US-brokered Gaza hostage-release and ceasefire deal.