Following far weaker than expected December manufacturing data, which highlighted the negative impact of the trade war, import and export data for the month has now indicated further weakness.
Chinese exports fell 4.4% year over year while imports fell 7.6% year over year in December. Both these figures were well below market forecasts of +2.5% and 0% respectively, with the exports sector marking its most significant decline in two years.
Foreign Firms Shunning Chinese Components
The breakdown of the data shows weakness in commodity energy goods, such as coal and crude oil, however, significant declines were also seen in some electronics goods ranging from iPhones to automobile parts. Indeed, reductions in electronics were even more severe in the import data.
These latest declines reflect the growing concern that some firms are beginning to actively avoid Chinese electronics, a theme which is likely to develop further over 2019.
Chinese Trade Surplus with US Hits Highest Level
The latest trade surplus data for the year of 2018 shows imports and exports having risen 15.8% and 9.9% respectively, leading to the creation of a $351.8 billion annual trade surplus. While an impressive figure, this level is below the $509.7 billion figure registered.
This latest trade data is likely to put even more pressure on the negotiations between the US and China as China’s trade surplus with the US was seen rising to $323 billion in 201, its highest ever level.
The breakdown of the data shows exports to the US has risen 11.3 % year on year in 2018 while imports from the US to China rose just 0.7% over the same period.
USDCNH is fast approaching support at the 6.7174 level where we have prior swing highs and swing lows offering structural support, as well as the retest of the broken bearish trend line from 2016 highs. While above here, focus remains on a further rotation higher, below here the 6.6237 level comes into focus.