Wednesday, May 5, 2010

March 2010 Trade: Busting Out

So much for looking at the upper range of last month’s interval forecast – the March numbers went well past (log annual and monthly changes; seasonally adjusted):


The post-CNY bounce was a lot stronger than I figured, and it also gives a big boost to expectations of a very strong Q12010 real GDP growth figure which should be due out at the end of this month. This also means that another 25bp hike in the Official Policy Rate is now definitely on the table for the next Monetary Policy Meeting, due next week.

Back on the trade front, most of the growth occurred in non-electronics exports:


…and I suspect the boost is mainly being driven by improvements in the terms of trade i.e. we’re benefiting from higher commodity prices:


The appreciation of the MYR over the last two quarters dampens the effect of higher prices somewhat, but not enough. Note that the global economy has recovered to its pre-recession income level, so growth from here on out is subject to output constraints which will have the effect of boosting commodity prices further.

The outlook over the 2Q2010 looks even better, with intermediate good imports climbing continuously since last August. For next month’s forecast though, I expect a bit of mean reversion to be going on, though realisation should still be in the upper range of the forecast:

Seasonally adjusted model


Point forecast:RM56,234m, Range forecast:RM63,284m-49,185m

Seasonal difference model


Point forecast:RM51,333m, Range forecast:RM58,566m-44,100m

Technical Notes:

Preliminary March 2010 External Trade Report from the MATRADE

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