China's exports and imports fell more than expected in July in a rocky start to the third quarter, pointing to further weakness in global demand in the aftermath of Britain's decision to leave the European Union. As Sonia Legg reports, that's a problem for Germany too, despite slightly better than expected industrial output in June.
It's not just the cranes at Tianjin port which go up and down - China's economy is proving equally mobile, although trade, it seems, is more down than up. Imports fell for the 21st month in a row in July, and exports weren't much better - they've now fallen for 12 of the past 13 months. It leaves China with the biggest trade surplus since January. And an economy growing at its slowest pace in a quarter of a century. (SOUNDBITE) (English) MARKET ANALYST, IG, CHRIS BEAUCHAMP, SAYING: "I think it is a sign that both the global economy is weaker and, of course, the internal Chinese economy isn't as strong as it should be, and then of course we have to think about what happens next. What kind of action the Chinese government, the PBOC take to try and cushion the impact of any weakness here." Exports to the United States - China's top market - fell 2.0 percent, slightly less than shipments to the European Union. (SOUNDBITE) (English) MARKET ANALYST, IG, CHRIS BEAUCHAMP, SAYING: "It does show there's a lot of weakness in the developed markets where Chinese exports are so crucial so it does pan out into bigger worries about Brexit and the state of the euro zone." Germany is the euro zone's strongest economy and industrial output there in June rose slightly. But it's relying on private consumption to drive growth. (SOUNDBITE) (English) MARKET ANALYST, IG, CHRIS BEAUCHAMP, SAYING: "The German economy is still ticking along in the right direction and that partly explains why we are seeing strength in the German stock market. Now it feeds again into what the ECB can and will do over the next few months to try and stimulate the euro zone economy." Stimulus is a possibility in China too, even though most analysts would prefer to see structural reforms. A further interest rate cut is thought possible this year or a reduction in banks' reserve requirements.