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China’s trade data showed a sharp divergence in March, with exports slowing while imports surged amid volatile commodity markets. Exports rose 2.5% yoy, down from prior strength and well below expectations of 8.6%, marking a five-month low. In contrast, imports jumped 27.8% yoy, far exceeding forecasts of 11.2% and recording the strongest growth since November 2021, pushing the trade surplus to USD 51.13 billion.

The weakness in exports points to softer external demand, while the surge in imports suggests front-loading of commodity purchases amid rising price risks. However, energy imports showed strain from geopolitical disruptions. Crude oil imports fell -2.8% yoy, while natural gas imports dropped -10.7% yoy to their lowest since October 2022. The Iran war and disruptions in the Strait of Hormuz have begun to affect flows, with some Chinese vessels reportedly delayed.

Officials acknowledged the challenging backdrop. Customs Vice Minister Wang Jun said global oil prices have seen “fierce fluctuation,” creating a “complex and severe” trade environment. With Middle East supply disruptions expected to weigh further on April imports, the data highlights rising uncertainty for China’s trade outlook, where external demand softness and energy volatility are beginning to converge.

The RBA is facing a “central banker’s nightmare” as rising oil prices push inflation higher while threatening economic activity. Speaking in New York, Deputy Governor Andrew Hauser warned that the Middle East conflict is delivering a significant income shock to Australia, complicating the policy outlook at a time when inflation is already “too high.”

Hauser highlighted the growing tension between price pressures and growth risks. “It is the central bankers nightmare, you know, inflation up, activity down,” he said. While recent consumer sentiment surveys have plunged, he cautioned that they may not fully capture the extent of the hit to consumption. “If they are right, we have a big income shock coming our way,” he added, pointing to the impact of higher fuel costs on household spending.

At the same time, Hauser acknowledged the high degree of policy uncertainty. “I wouldn’t say we have high confidence that we’ve set interest rates at the right level,” he said, emphasizing the need to closely monitor how the shock feeds through to the economy. With inflation pressures clearly skewed to the upside and energy costs yet to fully pass through, the RBA is likely to remain focused on medium-term inflation risks, even as growth headwinds intensify.

Australian business confidence has collapsed at a pace only seen during the GFC and COVID, highlighting the immediate impact of Middle East tensions on sentiment. NAB Business Confidence plunged from 0 to -29 in March, marking the second-largest monthly decline in the survey’s history. As NAB’s Gareth Spence noted, declines of this magnitude have “previously only been seen in the GFC and the onset of COVID,” underscoring the severity of the shock.

However, the breakdown in confidence has not yet translated into a sharp deterioration in activity. Business Conditions were little changed at 6, suggesting the economy is still carrying underlying momentum. Spence emphasized that “while the global news backdrop has impacted sentiment, it is still early days in terms of the flow through to activity,” pointing to a lag between sentiment and real economic performance.

At the same time, inflation pressures are already building. NAB reported that purchase cost growth more than doubled to 3% on a quarterly basis, while product price growth rose to 1.1%. Spence noted the impact on costs and prices has been “immediately obvious,” reinforcing the view that the shock is feeding directly into the inflation pipeline.

Full Australia NAB Business Confidence release here.