China's trade picks up while inflation eases

Updated: Friday, 08 Feb 2013 08:08

China's trade picked up and inflation eased in January as a shaky economic recovery gained traction.

Much of the change was due to the Lunar New Year holiday, which distorts China's economic data each year. But analysts said that today's data looked promising.

Export growth accelerated to 25% from the previous month's 14.1% as companies rushed to fill orders before shutting down for a holiday break of up to two weeks.

Import growth accelerated to 28%, more than quadruple the previous month's 6%.

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China's trade growth has rebounded in recent months in a sign of economic recovery but longer-term trade measures are likely to show lower growth than January's double-digit increase.

Analysts say the recovery will be gradual and too weak to support a global rebound without improvement in the US and Europe.

Last year's Lunar New Year shutdown began in January, leaving fewer work days and boosting this year's figures by comparison. This year's holiday falls entirely in February, which will make this month's trade look unusually weak.

Once holiday distortions are factored out, trade growth for the first three months of the year should be in high single digits, Goldman Sachs economists said in a report.

China's economic growth ticked up in the final quarter of last year from a three-year low. The World Bank and private sector forecasters expect economic growth of about 7.5% this year. That would be stronger than the West and Japan but China's weakest performance since the 1990s.

Inflation eased to 2% in January from the previous month's 2.5% despite a 37% jump in vegetable prices after the coldest winter in seven years damaged crops, the National Bureau of Statistics reported. Vegetable prices in some areas soared 74.6%.

The inflation decline was due in part to comparison with last January, when the Lunar New Year holiday began earlier and food prices spiked as families stocked up for banquets. This year, the food price spike will show up in February data.

Pressure for prices to rise has increased in recent months, possibly constraining Beijing's ability to support the recovery if needed with more spending or interest rate cuts. Inflation is politically dangerous in a society where the poorest families spend up to half their incomes on food. Beijing is pinning its hopes for recovery on government-driven investment and domestic consumer spending.

That is rising but not as fast as authorities want, forcing the government to fill the gap with spending on building subways and other public works. Analysts warn China's recovery could be vulnerable if trade or government spending weaken.

China's global trade surplus widened 6.5% from January 2012 to $29.2 billion. Exports were $187.4 billion while imports totaled $158.2 billion. The politically volatile trade surplus with the US, which has temporarily overtaken the struggling European Union as China's biggest export market, narrowed by 2.8% from a year earlier to a still-hefty $17.2 billion.

The trade surplus with the 27-nation EU contracted 10.9% to $12.3 billion. Exports to France fell 6.4% and shipments to Italy were off 2.8%.

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