Executive Summary of the Report

Firstly, exports in September increased by 2.4% year-on-year, which is lower than the previous value of 8.7% and the cumulative year-on-year growth of 4.6% for the first eight months. Is this deceleration merely a data fluctuation or does it reflect changes in overseas demand? This is a question of significant market concern.

Secondly, the base effect is one reason. Last year, September and November were two peaks with monthly export values both above 290 billion USD, and the sequential growth also exceeded the seasonal pattern. This results in a high base for this year's September. A simple calculation shows that if the sequential growth in September last year was not the seasonal 4.4% but the average 2.7% of the previous five years, then this year's September year-on-year growth would be 4.1%. We can roughly estimate that the base effect's impact on this year's September year-on-year growth is around 1.7 percentage points.

Thirdly, another reason is the impact of extreme weather. The General Administration of Customs pointed out that "two typhoons landed in the Yangtze River Delta in September, and historical data also show that the impact of typhoons on exports lasts for a relatively long time. After typhoons, the scheduling of fleets is often postponed, leading to a lag in exports." The meteorological department also noted that the frequency of autumn typhoons since September this year has been more active than the historical average. The typhoons in September also impacted Vietnam's economy and exports.

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Fourthly, beyond these factors, there are marginal changes in the fundamentals. This may exist, as seen from the PMI new export orders, which were relatively stable from May to August, but in September they decreased by 1.2 points month-on-month to the lowest since March. In September, the export growth rates of South Korea and Vietnam were also lower than in August. The export growth rate to the EU in September fell significantly, with a monthly year-on-year increase of only 1.3% (the average for the previous three months was 8.5%), which should be related to the increased economic uncertainty in the Eurozone, and the European Central Bank also cut interest rates again in September.

Fifthly, in summary, September's exports show some inherent deceleration characteristics, such as the impact of demand from Europe; however, there are also exogenous disturbances including the base effect and weather factors. There are currently no significant trend changes. Moreover, with continuous interest rate cuts in Europe and America, subsequent demand may be supported. The latest report released by the WTO on October 10th slightly revised the global merchandise trade volume growth for 2024 to 2.7%, slightly higher than the previously forecasted 2.6%. However, the WTO also pointed out that geopolitical situations such as the Middle East are potential risk factors.

Sixthly, looking at the main export products, the growth rate of labor-intensive products is relatively low, with textiles, clothing, bags, and toys having a combined year-on-year growth rate of only -6.7% in September; electronic products are still in the positive growth range, but the growth rate has fallen significantly, with mobile phones, automatic data processing equipment, and integrated circuits having a combined year-on-year growth rate of 1.6% in September; the export of home appliances is 4.5% year-on-year, significantly slowing down from the previous consecutive double-digit growth rates; high-end manufacturing products such as automobiles and ships still have relatively fast growth rates, with automobile exports increasing by 25.7% year-on-year in a single month, higher than the cumulative growth rate for the first eight months; ship exports increased by 113.8% year-on-year.

Seventhly, the growth rate of imports is hovering at a low level. The import value in September was 0.3% year-on-year, slightly lower than the previous value of 0.5%. Considering the base has risen, the trend growth rate may not change much. Imports are a reflection of domestic demand, and it remains to be seen when a significant change will occur. Looking at the main products, the growth rate of soybean imports is relatively fast; the growth rate of major industrial raw materials is slightly higher than the previous value; the growth rate of automobile imports has decreased significantly.

Eighthly, the export data for September may still be within the normal range of data fluctuations, but it serves as a reminder. The three driving factors for the economy this year are exports, equipment updates, and central project infrastructure; the three drag factors are real estate, consumption, and local project infrastructure. If global trade and exports slow down subsequently, domestic demand pressure will be relatively greater. From this logic, the necessity of this round of counter-cyclical policies can be understood. The entry point of this round of policies is relatively accurate (stabilizing real estate, reducing the interest rates of existing loans to stabilize consumption, and relaxing fiscal and monetary policies corresponding to the broad supply of financing), and it should be able to bring about a change in the slope of nominal growth. The financial market is essentially still pricing this process.In September, exports grew by 2.4% year-on-year, lower than the previous value of 8.7% and the cumulative year-on-year growth of 4.6% for the first eight months. Is this slowdown merely a fluctuation in data or does it reflect changes in overseas demand? This is a question of considerable market interest.

September exports grew by 2.4% year-on-year, lower than the 7.0% and 8.7% seen in July-August. The year-on-year growth rate in September also fell below 7% for the first time in the past five months.

The base effect is one reason for this. Last year, September and November were two high points, with monthly export values both above $290 billion, and the sequential growth also exceeded seasonal norms. This results in a high base for this year's September. A simple calculation shows that if last September's sequential growth was not the seasonal 4.4% but the average of 2.7% for the same period over the previous five years, then this September's year-on-year growth would be 4.1%. We can roughly estimate that the base effect's impact on this year's September year-on-year growth rate is around 1.7 percentage points.

In our September 2023 report "September Export Performance and Its Impact on the Macroeconomy," we analyzed the reasons behind the above-seasonal export performance in September: looking at high-frequency data, the export performance in September was not surprising. Domestic port cargo and container throughput in September reached a high since May on a year-on-year basis. Export growth rates for South Korea and Vietnam also accelerated. This should be related to the rebound in demand in Europe and the United States during the same period, with the U.S. ISM manufacturing PMI at 49.0 in September, significantly higher than the previous value of 47.6. The European PMI also remained above the July low for two consecutive months.

Another reason is the impact of abnormal weather. The General Administration of Customs pointed out that "two typhoons landed successively in the Yangtze River Delta in September, and historical data also show that the impact of typhoons on exports lasts for a relatively long time. After typhoons, the scheduling of fleets tends to be postponed, leading to a lag in exports." The meteorological department also pointed out that the frequency of autumn typhoons since September this year has been more active than the historical average. The September typhoons also affected Vietnam's economy and exports.

At the beginning of September, Typhoon "Mekkhala" successively landed in Luzon Island in the Philippines, Wenchang City in Hainan Province, Xuwen County in Guangdong Province, and Quang Ninh Province in Vietnam, becoming the strongest typhoon to land in China since 1949 in the autumn. On September 16, Typhoon "Bebinca" landed along the coast of Pudong New Area in Shanghai, becoming the strongest typhoon to land in Shanghai since 1949. On September 19, Typhoon "Prasan" landed along the coast from Xiangshan in Zhejiang to Pudong in Shanghai.

In addition, there are marginal changes in the fundamentals. This may exist, as seen from the PMI new export orders, which were relatively stable from May to August, and dropped by 1.2 points in September to the lowest since March. South Korea and Vietnam's export growth rates in September were also lower than in August. China's export growth rate to the EU in September fell significantly, with a monthly year-on-year increase of only 1.3% (the average for the previous three months was 8.5%), which should be related to the increased uncertainty in the eurozone economy during the same period, and the European Central Bank also cut interest rates again in September.

The September PMI new export orders were 47.5, lower than the previous value of 48.7. This indicator has been hovering between 48 and 49 from May to August.

In September, South Korea's exports grew by 7.5% year-on-year (previous value 11.4%); Vietnam's exports grew by 8.4% year-on-year (previous value 16.1%).

In September, China's exports to the United States grew by 2.2% year-on-year (previous value 4.9%); exports to the EU grew by 1.3% year-on-year (previous value 13.4%); exports to Japan fell by 7.1% year-on-year (previous value 0.5%); exports to ASEAN grew by 5.5% year-on-year (previous value 9.0%); exports to India fell by 9.3% year-on-year (previous value 14.0%); exports to Africa fell by 0.7% year-on-year (previous value 4.5%); exports to Russia grew by 16.6% year-on-year (previous value 10.4%).A brief summary indicates that there is a certain endogenous slowdown in exports in September, such as the impact of demand from Europe; however, there are also exogenous disturbances including base effects and weather factors. Currently, there are no significant trend changes. Moreover, with consecutive interest rate cuts in Europe and the United States, subsequent demand may be supported. On October 10th, the WTO released its latest report, slightly revising the global trade growth rate for 2024 to 2.7%, slightly higher than the previously forecasted 2.6%. However, the WTO also pointed out that geopolitical situations in the Middle East and other regions are potential risk factors.

The European Central Bank lowered interest rates twice in June and September this year, and there is a high probability of another rate cut in October. The United States lowered interest rates in September this year, and there is a high probability of consecutive rate cuts in November and December.

Overseas monetary policy adjustments will be beneficial in supporting expectations for the real sector. Logically, concerns about recession in the early stages of rate cuts will constrain consumption and investment, leading to cautious inventory replenishment by businesses; but when policies accumulate to a certain extent, demand expectations will gradually stabilize. This is essentially the assumption of a "soft landing." Whether Europe and the United States can successfully achieve this round remains to be observed.

Looking at the main export products, labor-intensive products have a lower growth rate, with textiles, clothing, bags, and toys having a combined year-on-year growth rate of only -6.7% in September; electronic products are still in a positive growth range, but the growth rate has fallen significantly, with mobile phones, automatic data processing equipment, and integrated circuits having a combined year-on-year growth rate of 1.6% in September; home appliance exports have a year-on-year growth rate of 4.5%, significantly slowing down from the previous double-digit growth rate; high-end manufacturing products such as automobiles and ships still have a relatively fast growth rate, with automobile exports having a single-month year-on-year growth rate of 25.7%, higher than the cumulative growth rate for the first eight months; ship exports have a single-month year-on-year growth rate of 113.8%.

In September, textile exports decreased by -3.4% year-on-year (previous value 4.5%); clothing exports decreased by -7.0% year-on-year (previous value -2.7%); bag exports decreased by -15.8% year-on-year (previous value -10.6%); toy exports decreased by -8.0% year-on-year (previous value -8.3%).

In September, mobile phone exports decreased by -5.2% year-on-year (previous value 17.0%); automatic data processing equipment exports increased by 4.2% year-on-year (previous value 10.8%); integrated circuit exports increased by 6.3% year-on-year (previous value 18.2%).

In September, home appliance exports increased by 4.5% year-on-year (previous value 12.0%); automobile exports increased by 25.7% year-on-year (previous value 32.7%, cumulative year-on-year growth rate for the first eight months 20.0%); ship exports increased by 113.8% year-on-year (previous value 60.6%).

Import growth is hovering at a low level. In September, the import value increased by 0.3% year-on-year, slightly lower than the previous value of 0.5%. Considering that the base has risen, the trend growth rate may not change much. Imports are a reflection of domestic demand, and it remains to be seen when a significant change will occur. Looking at the main products, soybean imports have a relatively fast growth rate; the growth rate of major industrial raw materials is slightly higher than the previous value; the decline in automobile imports is relatively large.

Looking at the main product import volumes, in September, soybean imports increased by 59.0% year-on-year, higher than the previous value of 29.7%. Iron ore imports increased by 2.9% year-on-year, higher than the previous value of -4.7%; crude oil imports decreased by -0.6% year-on-year, higher than the previous value of -7.0%; steel imports decreased by -13.4% year-on-year, higher than the previous value of -20.3%; unforged copper and copper materials imports decreased by -0.3% year-on-year, higher than the previous value of -11.3%; automobile imports decreased by -21.4% year-on-year, lower than the previous value of 14.3%.

The export data in September may still be within the normal range of data fluctuations, but it serves as a reminder. The three driving factors of the economy this year are exports, equipment updates, and central project infrastructure; the three drag factors are real estate, consumption, and local project infrastructure. If global trade and exports slow down in the future, domestic demand pressure will be relatively greater. From this logic, the necessity of this round of counter-cyclical policies can be understood. The entry point of this round of policies is relatively accurate (stabilizing real estate, reducing the interest rates of existing loans to stabilize consumption, and relaxing fiscal and monetary policies corresponding to the broad financing supply), and it should be able to bring about a change in the slope of nominal growth. The financial market is essentially still pricing this process.