Japan’s exports dropped for the first time in more than two years as demand slumped in several key overseas markets, signaling headwinds for the economic recovery.

The value of exports fell 0.3% in July from a year earlier, retreating for the first time since February 2021, the finance ministry reported Thursday. Economists had forecast a 0.2% decline. Imports fell for a fourth month, sliding 13.5% from the previous year, the steepest decline since September 2020. Economists had estimated they would fall by 15.2%.

The trade balance slipped back into the red, with a deficit of 78.7 billion yen ($538 billion) after a 43 billion yen surplus in the previous month. Economists had expected the surplus to widen to 47.9 billion yen.

Exports data continued to highlight uneven economic conditions overseas. Shipments to the US rose by 13.5% from a year ago, and those to Europe increased by 12.4%. Meanwhile, exports to China, a key trading partner for Japan, slid by 13.4%, the largest drop since January, with shipments of cars and chips and chip components dipping at double-digit clips.

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