BEIJING (Reuters). – China unexpectedly saw its imports fall in March. COVID-19 curbs in large parts of China hampered freight arrivals. Domestic demand slowed and domestic freight growth slowed. According to analysts, this could lead to a slowing down in trade for the second quarter.

Softer trade data are expected to increase expectations for more government support. On Wednesday, an advisor called for banks to reduce their reserve requirements as well as interest rates in order to stimulate a faltering economy.

On Wednesday, customs data revealed that inbound shipments decreased 0.1% in March compared to a year ago. It was the first drop since August 2020. This is compared to a 15.5% increase in inbound shipments in the first two-months of 2019 and an 8% rise forecast by analysts according to Reuters.

It was wide-based. China saw its imports drop 14% in March, and it had the largest gas import volume since October 2020. The COVID-related outbreaks in manufacturing caused a drop of 8.8% in the purchase of and slowed industrial demand.

Although exports are a key driver of the economy, they rose 14.7% last month, exceeding analyst expectations for an increase of 13%. However, this is a slowdown from January-February’s 16.3% growth.

Nomura wrote in a note, “Due the severe disruptions of factory operations and road transport as a consequence of the worst COVID-19 Wave and the most severe locksdowns since spring2020, we expect exports growth to plummet to 0.0% year on year in April and import growth to fall further to minus 3.0%.”

Analysts expect that trade conditions will worsen in April due to slower customs clearance, and the effects of a Shanghai lockdown.

China has been trying to stop its biggest COVID-19 epidemics for two years. This has resulted in activity being restricted in many cities, including Shanghai. It also forced several companies to cease operations. These included Foxconn (NASDAQ:), Apple (NASDAQ;) and Volkswagen (DE)

According to Zheng Houcheng (director of the Yingda Securities Research Institute), this likely led to a lower demand for Chinese raw materials.

Zheng stated that the pressures on the global economy are likely to lead to a drop in commodity prices in the medium-term. This would impact China’s exports in volume and value in the second quarter.

China’s recent strong trade performance is expected to decline this year, as countries like Russia and Ukraine are forced from COVID lockdowns. They also face higher energy costs and logistical disruptions due to Russia’s conflict in Ukraine.

According to recent surveys, factory activity fell in March as declines in export orders increased. Firms reported that clients had cancelled orders or suspended them due to uncertainty surrounding the Ukraine conflict.

Qi Yong was the general manager for Shenzhen Muchen Technology Co. She said that European customers ordered 20% less in March than a year earlier, but outbound shipments from North America remained steady.

Qi explained that the war had weakened purchasing power, and there were risks for economic slowdowns within European economies. He added that importers exposed to the bloc could continue to feel it.

China reported a $47.38 billion trade surplus in March. That is nearly twice its forecast $22.4 million due to unexpected import declines. In January and February, it reported a surplus of $115.95 Billion.