2016 Chinese Trade Disappoints

Weekly Report - 15/01/2017

Contraction in Overall Surplus Weakens Fundamental Outlook



With analysts searching desperately for hints of recovery in global trade, the latest trade figures reported by the Chinese General Administration of Customs showed that trade failed to recover during the final month of 2016.  Considering the efforts of policymakers to jumpstart growth, the latest data may foreshadow new headwinds for the economy as the new year begins.

Last Week

Although financial markets were full of anticipation leading up to the first press conference of President-elect Donald Trump for 2017, the event was largely a snoozer as no details about fiscal policy plans and tax reform were forthcoming.  However, remarks from key Federal Reserve officials showed that the only disagreement amongst members was not about raising rates, but how quickly.

The dollar remained under pressure throughout the week, pushing gold prices back above $1200 per troy ounce as haven assets remained bid.  Besides speeches in the US, attention was focused on Chinese fundamentals after the trade surplus shrank to the lowest point since March and consumer inflation failed to continue its trend higher.

With exports tumbling following a positive print back in November combined with the annualized downtick in Chinese dollar-denominated trade, Chinese policymakers will have their work cut out for themselves as they attempt to maintain higher growth.  Meanwhile, the Turkish Lira continued to be the worst performing currency as a downgrade from Fitch looms large over the economy.  The Pound fell to multi-week lows as the uncertainty surrounding the UK government’s Brexit position continued to create a sense of anxiety.


The Week Ahead

With 2017 in full swing, significant data is set to be released throughout the week from across the globe, starting with inflation figures in Europe.  Consumer price data from the United Kingdom will be released on Tuesday, followed by similar final figures for the month of December from the Euro Area and United States.

While headline UK and US figures are forecast to keep gaining ground, the comparable Euro Area numbers are expected to remain on hold at 1.10%.  New Zealand is also set to report on consumer price inflation on Wednesday, with any disappointments potentially leading to further accommodation from the Reserve Bank of New Zealand over the medium-term if price growth fails to recover.

Canada will round out the week with its own numbers for December on Friday.  Aside from CPI figures, the Bank of Canada is set to decide on monetary policy in a decision on Wednesday, with interest rates forecast to remain on hold.  Otherwise, the final major event of importance for Friday is the fourth quarter and annualized 2016 GDP figures due from China.  Although annualized growth is forecast to print at 6.70%, quarterly growth is expected to moderate slightly from third quarter levels.


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