CNY: Record and deflation surplus – Commerzbank

According to Bloomberg, Chinese exports increased 4.8% year -on -year in terms of US dollars in May, which was slightly lower than the 6% consensus forecast. However, imports fell much more than expected, decreasing 3.4% year -on -year. Consequently, the Chinese economy registered an external commercial surplus of more than 100 billion US dollars in May. The accumulated sum of the last 12 months increased to 1.13 billion US dollars, establishing a new record. Calculated in CNY, the commercial surplus was 743 billion, the third highest in history, says Volkmar Bour, a currency analyst of Commerzbank.

The CNY will weaken in the coming months

“In relation to the Gross Domestic Product (GDP), the 12 -month accumulated sum of the surplus thus increased to 5.4%, almost a higher percentage point than in May last year. Consequently, Chinese growth continues to depend largely on foreign trade. Inflation figures published on Monday also point to continuous weakness in internal demand. According to these figures, production prices fell 3.3% year -on -year which represents a more pronounced fall than in previous months.

“Consumer prices are not so affected, but the CPI was also in negative territory during the fourth consecutive month, falling 0.1%. Compared to the previous month, prices fell 0.2%. However, in a positive note, the fall in consumer prices is largely due to the decrease in energy and food prices. Excluding these, the underlying rate is currently stable 0.6% compared to the previous year.

“In general, Monday’s figures show that the Chinese economy, and domestic demand in particular, remains under pressure. Consequently, interest rates are probable to remain low, and monetary policy could relax even more, which should exert pressure on the currency. Despite the current temporal strength of the CNY and the lowest USD/CNY exchange rate, I still hope that the CNY will weaken in the coming months.”