China’s exports unexpectedly fell in October due to restrictions from COVID, inflation and rising interest rates

China’s exports and imports unexpectedly contracted in October, the first simultaneous decline since May 2020, as rising inflation and rising interest rates hit global demand, while new COVID-19 restrictions at home disrupted production and consumption.

Dismal October trade data highlight the challenge for China’s policymakers, as exports have been one of the bright spots in the struggling economy.

Outbound shipments in October fell 0.3% from a year earlier, compared with a 5.7% rise in September, official data showed on Monday, well below analysts’ expectations for a 4.3% rise. It was the worst performance since May 2020.

The data suggest that demand remains weak, putting further pressure on the country’s manufacturing sector and threatening any meaningful economic recovery in the face of lingering COVID-19 restrictions, lingering property weakness and the risks of a global recession.

Chinese exporters were unable to take advantage of a further weakening of the yuan currency and an important end-of-year buying period, underscoring heightened tensions among consumers and businesses around the world.

“Weak export growth likely reflects weak external demand and supply disruptions due to the COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing the COVID-19 disruptions at the Foxconn factory in Zhengzhou, a major Apple supplier. . an example

Apple ( AAPL ) said it expects lower-than-expected shipments of its top-end iPhone 14 models after a production cut at a virus-infected plant in China.

“Looking forward, we believe that exports will decrease further in the coming quarters. The shift in global consumption patterns that boosted demand for consumer goods during the pandemic is likely to continue to moderate,” said Zichun Huang, an economist at Capital Economics.

“We believe that aggressive financial tightening and the drag on real incomes from high inflation will push the global economy into recession next year.”

Nearly three years into the pandemic, China has maintained a strict policy of containing COVID-19 that has caused significant economic damage and widespread frustration and exhaustion.

Weak factory and trade data in October suggested the world’s second-largest economy is struggling to climb out of the doldrums in the final quarter of 2022 after reporting a faster-than-expected rebound in the third quarter.

China’s policymakers last week pledged to prioritize economic growth and press ahead with reforms, allaying fears that ideology may take precedence as President Xi Jinping begins a new leadership term and faces a lack of a clear exit strategy from the ongoing blockade.

Imports were hurt by tepid domestic demand, the COVID-19 curtailment and fresh lockdowns in October, as well as the cooling market.

Inbound shipments fell 0.7% from a 0.3% rise in September, below expectations for a 0.1% increase, the weakest result since August 2020.

China’s soybean imports fell and coal imports fell as austere pandemic measures and property slumps disrupted domestic production.

Overall trade figures showed a slightly larger surplus of $85.15 billion, compared to September’s $84.74 billion, missing the forecast of $95.95 billion.