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TRADE WARS
China says inflation, factory output slowing
by Staff Writers
Beijing (AFP) March 9, 2012

US trade gap widens sharply in January
Washington (AFP) March 9, 2012 - The US trade deficit rose sharply in January, forging the biggest gap since October 2008 as imports surged on the back of high oil prices, official data showed Friday.

The trade gap grew to $52.6 billion, after an upwardly revised $50.4 billion in December, the Commerce Department reported.

The US gap in goods and services has been widening in recent months, a period of rising oil prices.

Underscoring the trend was the three-month average ending in January, which rose to $50.2 billion, from $47.0 billion in the October-December period.

The January trade deficit was much bigger than the $48.2 billion gap expected by most analysts.

In January, exports rose 1.4 percent to $180.8 billion, outpaced by $233.4 billion in imports, a jump of 2.1 percent from December.

The growth in imports was massive. According to the Commerce Department, the United States had not imported so many goods, $196.1 billion, since July 2008. The $37.3 billion in services imports was an all-time record, it said.

The US trade balance with the rest of the world has been hit by high oil prices. The world's biggest oil-consuming country saw its petroleum trade deficit jump 9.0 percent in January from December, while the price of imported crude remained above $100 a barrel for the fourth consecutive month.

US exports continued to show solid performances. The Commerce Department highlighted strong numbers for services, capital goods and auto vehicles and parts.

About half of the January trade gap was the politically sensitive trade deficit with China, a source of friction between the world's two biggest economies.

The deficit with China rose to $26.0 billion from $23.1 billion in December.

With its NAFTA partners, the US gap with Canada widened mainly due to imports of Canadian oil while that with Mexico shrank.

The deficit also narrowed with the eurozone as the single-currency area grapples with a public debt crisis and sharply slowing economic growth, and with Japan, still recovering from the earthquake and tsunami disaster of March 11, 2011.

Aaron Smith at Moody's Analytics said the January trade number would likely weigh on the pace of first-quarter US gross domestic product growth.

"While the pick-up in trade flows over the last couple months is a sign of better demand growth in the US and abroad, the widening of the real deficit suggests net exports are on track to shave around a half of a percentage point from first-quarter GDP growth," Smith said.


China's inflation rate slowed sharply in February and factory output eased, data showed Friday, adding to evidence of a slowdown in the economy and giving Beijing more room to relax credit limits.

The figures from the National Bureau of Statistics come as the economy faces headwinds over Europe's debt crisis and sluggish growth in the United States, which are hurting export-driven China.

The consumer price index rose 3.2 percent in February -- the lowest since June 2010 -- compared with 4.5 percent in January, when spending before the Chinese New Year holiday drove up retail prices, the government said.

Before January, inflation had eased for five straight months after hitting a more than three-year high of 6.5 percent in July and analysts had expected the downward trend to resume in February as the economy continued to slow.

Premier Wen Jiabao, speaking at the opening of the annual session of parliament on Monday, warned consumer prices remained high and the government's aim was to keep the inflation rate within 4.0 percent this year.

His remarks suggest policymakers will be cautious in relaxing the tight credit restrictions imposed in the past two years, while as he also forecast 2012 economic growth to slow further from the blistering pace of previous years.

The producer price index, which measures the cost of goods at the farm and factory gate and is a leading indicator of consumer prices, flatlined in February compared with a 0.1 percent increase in January.

Inflation has triggered social unrest in the past and senior leaders are anxious to keep prices of basic goods such as vegetables, meat and housing under control ahead of a once-a-decade power transition that begins later this year.

Beijing has twice lowered the banks' reserve requirement ratio in the past three months, effectively increasing the amount of money they can lend, and analysts said they expect further such moves in the coming months.

But they ruled out aggressive interest rate cuts, especially against a backdrop of rising global oil prices, as they could fuel inflation in energy-guzzling China.

"We do not expect a big shift in policy settings in the near-term, with any move to ease liquidity conditions likely to take the form of further cuts in banks' reserve requirements," said Brian Jackson of Royal Bank of Canada.

JPMorgan expects the inflation rate to slow to 2.8 percent by the third quarter, giving the government "wider scope to implement selective policy easing measures to counter the downside risks to growth".

Other data on Friday showed industrial output rose 11.4 percent in the first two months of 2011, compared with a year ago. The figure was below December's increase of 12.8 percent and analyst forecasts for 12.4 percent, according to Dow Jones Newswires.

Urban fixed asset investment expanded 21.5 percent in the first two months, compared with the same period last year, beating expectations for an increase of 19.0 percent.

Retail sales rose 14.7 percent in the two-month period.

Beijing combines the January and February figures for output, investment and retail sales due to distortions caused by the Lunar New Year holiday, which falls within the first two months of the year.

China has cut its economic growth target to 7.5 percent this year from eight percent last year, in an official acknowledgement that the export-driven economy is slowing as the eurozone crisis and slow pick up in the United States hurts demand for its products.

The Asian powerhouse expanded 9.2 percent last year, slowing from 10.4 percent in 2010, as global turbulence and efforts to tame high inflation put the brakes on growth.

The downward trajectory in consumer prices means inflation "can be safely relegated from the top spot of government concerns" as Beijing turns its focus to boosting growth, said Alistair Thornton, an analyst at IHS Global Insight.

But he noted the "tricky" challenge facing policymakers as they try to ensure the economy expands at a fast pace while keeping prices under control.

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China records huge February trade deficit
Beijing (AFP) March 10, 2012 - China swung into a huge trade deficit of $31.48 billion in February, customs data showed Saturday, as the West's economic troubles hit the world's second-largest economy.

China is normally a net exporter of goods -- it recorded a surplus of $27.28 billion in January -- but total monthly imports rose 39.6 percent year-on-year to $145.96 billion, with exports only going up 18.4 percent to $114.47 billion.

Chinese firms' efforts to sell to the country's major trading partners in the West are suffering from the effects of the eurozone debt crisis and weak economic recovery in the United States.

The deficit was the largest for at least 12 years, according to Dow Jones Newswires -- the extent of its archived data -- and far in excess of the median forecast of $8.5 billion among 15 economists it had surveyed.

Analysts had expected a deficit as imports recovered from temporary disruption after the unusually early Lunar New Year in January, but they had predicted a larger rise in exports and a smaller increase in imports.

China's trade figures are politically sensitive, with Beijing and Washington embroiled in a long-running dispute over the value of the yuan, which US politicians say is kept artificially low to unfairly help Chinese exporters.

The customs data came after statistics on Friday showed China's inflation rate slowing sharply in February and factory output growth also slipping, which could potentially give authorities more room to take easing measures.

"Overall, economic conditions are getting weaker at a fast pace," said Nomura economist Zhiwei Zhang. "The slowdown is happening faster than the government expected."

Premier Wen Jiabao, speaking at the opening of the annual session of China's parliament on Monday, forecast economic growth would slow further in 2012 from the blistering pace of previous years.

But the government has a difficult tightrope to walk between the perils of slowing growth and the risks of inflation, which it fears as a possible driver of social unrest.

Wen warned that consumer prices remained high and the government's aim was to keep the inflation rate within 4.0 percent this year, suggesting policymakers will be cautious about relaxing tight credit restrictions.

Beijing has twice lowered banks' reserve requirement ratio in the past three months, effectively increasing the amount of money they can lend, and analysts say they expect further such moves in the coming months, while ruling out aggressive interest rate cuts for fear of fuelling inflation.

The customs data showed that the energy-hungry country's crude oil imports reached a record monthly high at 23.64 million tonnes, equivalent to 5.98 million barrels a day.

Copper and iron ore imports reached their second-highest monthly volumes on record in February, the former almost doubling year-on-year and the latter up 34 percent.

Analysts say that China is nonetheless still likely to run a trade surplus for 2012.

The country often records monthly trade deficits early in the year, as manufacturers stock up on imported supplies that will later be processed into goods for export.

During the first two months of the year trade volumes with Russia jumped 31.9 percent on year to $13.51 billion and with Brazil they went up 10.6 percent to $11.54 billion, indicating growing trade among the BRICs group of emerging nations.

China's biggest trading partner remains the European Union, with $79.8 billion in two-way trade in January and February, up 4.7 percent. Next was the US, at $66.05 billion, up 9.2 percent.



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