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China’s July Export Growth Slows, Markets Slide

Last month’s export figures grew by only 1 percent year-on-year, an abrupt slowdown from the 11.3 increase recorded for June.

SHANGHAI — Chinese export and import growth slowed markedly in July, the latest indication that the world’s second largest economy is facing sluggish domestic consumption at home and slowing demand from troubled markets in Europe and the United States.

Last month’s export figures grew by only 1 percent year-on-year, an abrupt slowdown from the 11.3 increase recorded for June. Imports for July were up 4.7 percent year-on-year. In June, imports grew at a pace of 6.3 percent.

July’s export figures came in much weaker than economists had projected.

The trade data, released Friday by China’s custom bureau, followed other lackluster economic news out this week, including figures from the National Bureau of Statistics indicating slowing industrial output and retail sales in July. Factory production eased to 9.3 percent from a year before, down 0.3 percent from June while retail sales slowed to 13.1 percent in July, down from 13.7 percent in June. 

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Meanwhile, China’s CPI, or consumer price index, which is a key gauge of inflation, increased 1.8 percent year-on-year in July, down 0.4 percent from June. Easing inflation rates could lead to further cuts in interest rates or allow Beijing to enact more stimulus measures.

The government has cut interest rates twice since the beginning of June as well as decreased the amount of money banks must keep in reserve, enabling more lending to individuals and companies.

“The need for taking more counter cyclical actions to support domestic demand, in particular investment demand is more urgent than ever,” HSBC economists Sun Junwei and Qu Hongbin said in a note.

The HSBC economists said that bleak economic forecasts for Europe, waning job growth in the US as well as a slowdown in emerging markets, like India, means that China will have to continue to work to bolster domestic consumption. “The external outlook is more challenging than many expected,” HSBC said. “China’s domestic demand must play a pivotal role to counterbalance external weakness.”

 

The country’s economy grew at an annual rate of 7.6 percent from April to June, down from an 8.1 percent expansion rate in the first quarter of 2012.

The data dented major Asian stock markets. Japan’s Nikkei 225 lost 0.97 percent to close at 8,891.44 on Friday. Hong Kong’s Hang Seng lost 0.66 percent to close at 20,136.12 as sourcing giant Li & Fung shed more than 19 percent during the session to end the day at 12.90 Hong Kong dollars. The company released disappointing first-half figures Thursday.

 

European stock markets also edged down in morning trading on Friday on the Chinese data.

The FTSE MIB in Milan sank 0.9 percent to 14,520.38, followed by the CAC 40 in Paris, which was down 0.8 percent to 3,430.58. The DAX in Frankfurt fell 0.5 percent to 6,927.80 while the FTSE 100 in London retreated 0.2 percent to 5,840.61.

The euro traded at $1.23 while the pound traded at $1.56 at 10:00 am CET.

Retail and luxury stocks were mostly down, with the morning’s biggest fallers including Geox, which sank 1.5 percent to 1.78 euros; French Connection, which was also down 1.5 percent to 0.21 pounds; and Yoox, which fell 2.4 percent to 9.69 euros.

Among the few stocks that gained ground were Tod’s, which was up 0.4 percent to 84.90 euros; and Beiersdorf, which climbed 0.5 percent to 57.14 euros.