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 last month from a year earlier, while imports fell 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 of growth year-on-year.
"It was a big disappointment," JP Morgan 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 the data was released. It rebounded to 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 this month.
It also came ahead of Thursday's much-anticipated jobless figures for June. The unemployment rate in Australia was forecast to rise 0.1 per cent to 5.6 per cent amid a slower-than-expected transition from mining-led growth.
Economists said the decline of exports and imports, the first time since October 2009, excluding distorted figures during Chinese New Year, underscored the weakness of external and domestic demand.
"The current downside pressures to growth seem to be even larger than the mid-year slowdown [last year]," 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 a weakness in China's export data 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, Chinese imports from Australia were still rising.
"Imports from Australia were up almost 12 per cent year-on-year. Iron ore was a little bit lower than the past few months but still up in terms of volumes compared to a year ago," Mr Dragicevich said.
"So that's really the key factor for Australia, that the volume story in terms of our exports - particularly to China - continues to grow."
On Wednesday, the International Monetary Fund downgraded its growth forecast for China by 0.3 per cent to 7.8 per cent for this year. It lowered its outlook for next year by 0.6 per cent to 7.7 per cent.
Hong Kong-based brokerage CLSA also lowered this year's 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 had the Reserve Bank maintain an easing bias.
Financial markets were pricing in a 61 per cent chance of a cut to the cash rate next month, the highest expectations over the past month, Credit Suisse data showed.