More slowdown fears as China's trade slumps Source: CBA A surprise fall in China's imports and exports has signalled a further slowdown in the world's second-largest economy, spelling possible short-term risks for Australia. Exports for Australia's largest trading partner fell 3.1 per cent in June from a year earlier, while imports declined 0.7 per cent as China warned of a "grim" outlook. The figures were far from analysts' expectations of a rise in exports and imports. China's trade surplus widened to $US27.1 billion ($29.5 billion) from $US20.4 billion in May, while iron ore imports slowed to 6.8 per cent growth year-on-year. "It was a big disappointment," JPMorgan chief economist Stephen Walters said. We're not talking about abrupt slowdowns, but clearly the numbers today were pretty soft. The Australian dollar fell about US0.70¢ to US91.26¢ after data was released. It rebounded and was buying US92.10¢ late on Wednesday. The weaker data, which followed a central government crackdown on over-invoicing, came as a private survey found Australian consumer sentiment remained steady in July. It also came ahead of Thursday's much-anticipated jobless figures for June. The unemployment rate in Australia is forecast to rise by 0.1 per cent to 5.6 per cent last month amid a slower-than-expected transition away from mining-led growth. Economists said the decline of exports and imports, the first time since October 2009 and excluding distorted figures during Chinese New Year, underscored the weakness of external and domestic demand conditions. "The current downside pressures to growth seem to be even larger than the midyear slowdown in 2012," HSBC economists Sun Junwei and Qu Hongbin said. This also adds pressure ... on Beijing to fine-tune policy to prevent a hard landing. Mr Walters said weakness in China's export numbers suggested production was slowing in areas such as steel and cement, which could in turn lead to a weaker patch for Australian exports to China. But he warned against being "too downbeat," as improving conditions in some of China's biggest export markets, such as Japan, Europe and the US, meant there would be sufficient demand for Chinese products in those countries down the track. Commonwealth Bank currency strategist Peter Dragicevich said despite the weak headline numbers,imports from Australia were still rising. If you look at the imports from Australia, we're up almost 12 per cent year-on-year. Iron ore was a little bit lower than the last few months but still up in terms of volumes compared to a year ago," he said. So that's really the key factor for Australia, that the volume story in terms of our exports - particularly to China - continue to grow. The International Monetary Fund downgraded its growth forecast for China by 0.3 percent to 7.8 per cent for 2013 on Wednesday. It lowered its outlook for 2014 by 0.6per cent to 7.7 per cent. Hong Kong-based brokerage CLSA also lowered its 2013 growth forecast for China to 7 per cent, noting that first-quarter growth was disappointing. The slowdown in China's economy has weighed on growth forecasts for Australia. An expected peak in mining investment, together with a raft of soft economic data over the past few months has seen the Reserve Bank maintain an easing bias. UBS economist George Tharenou said the Westpac-Melbourne Institute survey on consumer sentiment showed that confidence was showing only a little improvement, despite the RBA's 200 basis points of rate cuts since November. Financial markets were pricing in a 61 per cent chance of a cut to the cash rate in August, Credit Suisse data showed.