Guosheng macro: behind the sustained strong export
1. In August, export growth continued to rise, while medical supplies were still the main support items, but the pull rate decreased.
In US dollar terms, the year-on-year growth rate of exports in August was 9.5%, higher than the expected value of 8.3% and the previous value of 7.2%, which was the third consecutive month of rise. Specifically:
>Medical supplies are still the main support, but the pull rate is down. In August, the export growth rates of textiles, plastic products and medical devices were 47.0%, 90.6% and 38.9% respectively, still significantly higher than the total export growth rate. However, since May, the export growth rate of textiles and medical devices has been falling sharply, and the pulling rate of the total exports of the three together has also decreased from 5.8% in May to 4.2% in August.
>The export of traditional commodities continued to rise, reflecting the recovery of foreign demand. Since May, the export growth rate of traditional commodities such as mechanical and electrical products, clothing, toys, furniture, lamps and lanterns has continued to rise, and the pull rate of the total export has increased significantly from - 3.3% in May to 7.8% in August. The increase in the growth rate of traditional commodity export reflects the improvement of foreign demand. As of August, the PMI of JPMorgan global manufacturing industry rebounded to 51.8%, and the new order index rose to 52.8%, both the highest since the end of 2018.
>The low base also supported the export growth in August. The year-on-year base of exports in August was - 1.0%, lower than the base of 3.4% in July, which also supported the rise of export growth this month.
>Exports are expected to remain strong and resilient, but there is limited room for growth to continue to rise. At present, the epidemic situation in major economies in the world has generally eased, and vaccine development has made progress, adding the "overdraft effect" of large-scale export in the early stage, the growth rate of medical material export in the future will continue to decline, and the driving effect on export will be weakened. However, due to the recovery of foreign demand and the low base before December, the subsequent export growth is expected to continue to be strong.
2. In August, the import growth rate dropped slightly, mostly due to short-term normal fluctuations, and the domestic demand recovery trend remained unchanged.
In terms of US dollar, the year-on-year growth rate of imports in August was - 2.1%, lower than the expected value of 0.4% and the previous value of - 1.4%. It has declined for two consecutive months, but it is still significantly higher than the low of - 16.6% in May. Specifically:
>Bulk prices rose sharply, but imports fell even more. In August, the year-on-year growth rate of imports of copper, copper products, crude oil and iron ore all decreased by more than 10 percentage points compared with that in July. The total import amount of the three imports pulled up the total imports by - 2.0%, which was lower than the pull rate of - 1.3% in July. The average CRB spot composite index in August was - 3.1% year-on-year, 6% higher than that in July; the month on month increase was 4.2%, the largest monthly increase since March 2014. The rapid rise of commodity prices may restrain the demand for bulk imports in the short term.
>The improvement trend of domestic demand remains unchanged, which will still form a support for imports. As of July, the profit growth rate of social welfare zero and industrial enterprises has continued to rise sharply. Meanwhile, although the PMI of manufacturing industry in August decreased by 0.1% compared with that in July, it has been above the boom and bust line for six consecutive months, and the domestic demand recovery trend is still continuing, which will support export growth.
>Import growth is expected to pick up in the next two months and will fall again at the end of the year. The import base in September and October is still low. At the same time, China's implementation of the first phase agreement between China and the United States, and the appreciation of RMB will also support imports. It is expected that import growth will pick up in September and October. In view of the substantial increase in the base in November and December, the import growth rate will probably fall back again.
3. In August, the surplus with the United States rose to the second highest level in history, and we should be alert to the risk of escalation of Sino US conflicts.
Since the beginning of the year, China's trade surplus with the United States continued to rise, reaching 34.24 billion US dollars in August, the second highest in history, only slightly lower than the US $35.54 billion in November of 18. In the previous report "re focusing on the US general election and Sino US relations - the third issue of US election tracking", we pointed out that the Sino US relations before the election were not optimistic, and the continued expansion of the surplus with the United States would aggravate the contradictions between the two sides. If the effect of China's subsequent expansion of imports to the United States is not satisfactory and the surplus with the United States continues to widen, we need to be alert to the risk of escalation of Sino US friction.
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