September's export growth rate slowed down significantly year-on-year, below market consensus expectations. How should this be interpreted, and what can be expected in the future?

September's export growth rate weakened more than expected year-on-year

In September, the year-on-year growth rate of exports slowed down to 2.4%, compared to 8.7% in August and the market consensus expectation of 5.9%. Our estimates show that after seasonal adjustment and excluding the impact of holidays, the month-on-month decrease in exports was 1.8%. The 3-month moving average of the环比 growth momentum weakened to -1.5% (0.2% in August). The General Administration of Customs stated that two typhoons landed in the Yangtze River Delta region in September, which may have caused some disturbances to export activities. In addition, recent global shipping difficulties may also have dragged down exports to a certain extent. Our estimates indicate that the actual year-on-year growth rate of exports slowed down from 15.7% in August to 13.0% in September.

The year-on-year growth rate of exports to major destinations generally slowed down

The year-on-year growth rate of exports to the G3 slowed down from 7.6% in August to 1.2%. Exports to the United States maintained year-on-year growth, but the growth rate slowed down to 2.8%. The year-on-year growth rate of exports to the European Union also slowed down. Affected by the high base last year, exports to Japan weakened to a year-on-year decline. Exports to ASEAN slowed down for four consecutive months to a year-on-year growth rate of 7.3%. The year-on-year growth rate of exports to "Belt and Road" economies, Latin America, and Africa all slowed down to the low single-digit range.

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Mobile phone exports weakened to a year-on-year decline, even with the new product delivery cycle

Both mobile phone exports and export volumes increased significantly month-on-month, partly supported by the new electronic product delivery cycle. However, given that last September was also a peak export period, mobile phone exports weakened to a year-on-year decline. The export growth rates of computers and integrated circuits also slowed down. The overall IT product export growth rate slowed down to 1.1% year-on-year. On the other hand, despite the low base last year, the year-on-year decline in consumer goods exports still expanded. The year-on-year growth rate of automobile and parts exports slowed down, but still maintained double-digit growth (13.4%). The currently announced export data does not show signs of "rush exports" before the U.S. election.

The import growth rate slowed down, indicating some weakening signs of domestic demand

The year-on-year growth rate of imports slowed down to 0.3%, compared to 0.5% in August, and the market consensus expectation was 0.6%. Our estimates indicate that the actual import volume may have improved from the previous year-on-year decline of 1.3% to a year-on-year increase of 1.2%, mainly due to the expansion of the year-on-year decline in import prices. A basket of bulk commodity imports turned from a year-on-year increase of 0.1% to a year-on-year decline of 0.1%. Affected by the expansion of the year-on-year decline in import prices, the year-on-year decline in crude oil imports expanded to 11.1%. The year-on-year decline in iron ore imports expanded, but the year-on-year growth rate of copper ore imports increased. Our estimates indicate that the import volume of iron ore and copper ore further slowed down, reflecting weakening demand. The year-on-year growth rate of IT component imports slowed down from 10.6% to 9.5%. Due to the technology industry entering an upward cycle in the last few months of last year, the base of IT component imports will be raised in the coming months. However, despite the high base, the year-on-year growth rate of computer imports further increased to 74.2%, which may be related to the continuous import of artificial intelligence-related computers. The import of machine tools still maintained a year-on-year decline, but the decline narrowed.

The year-on-year growth rate of exports gradually declined to the low single-digit range.The latest trade data indicates that the pace of trade growth has slowed down from previous highs. Major external survey data, such as the new order index for manufacturing in developed markets and the new export order index in emerging markets, have both weakened. The new export order index of China's National Bureau of Statistics PMI and the new order index of Caixin PMI have also weakened. In the Asian region, export growth in South Korea and Vietnam slowed down in September. In addition, the base for IT product exports will rise in the coming months. Overall, we believe that the growth rate of exports will gradually slow down. However, there may be some compensatory rebound after the typhoon weather ends in September, and the base effect may bring a temporary increase in export growth rate. Overall, we believe that export growth may hover in the low single digits in the coming months.

Raise the forecast for the RMB exchange rate against the US dollar

In September, the RMB appreciated by 1% against the US dollar, fluctuating around 7.016 at the end of the month, mainly due to the weakening of the US dollar index in the past month, and the Chinese government has introduced a series of policies and measures to stabilize growth. We recently adjusted our forecast for the RMB against the US dollar at the end of 2024 to 6.95 (previously forecasted at 7.10). Nevertheless, if there are fluctuations in market expectations for interest rate cuts by the Federal Reserve, policy support from the Chinese government, and the performance of macroeconomic data, the RMB may still face depreciation pressure and experience short-term fluctuations.