May 2010 External Trade

In my last trade post, I said that I thought that trade would continue to contract based on my forecasting models, but inventory adjustments would cause exports to marginally increase – why, oh why, don’t I believe my own models (log annual and monthly changes; seasonally adjusted):

Exports contracted by 5.9% while imports improved 1.4% (m-o-m, seasonally adjusted, log terms), although the annual growth rates still look good for both. The main culprit was a continued contraction in electronics exports (log monthly changes; seasonally adjusted):

Based on the tentative improvement in imports, I’d expect a slight rebound next month, though with China’s growth visibly slowing, there’s not much prospect for further trade growth over the next few months.

Based on the uptick in imports, there should be a rebound in June exports (fingers crossed):

Seasonally adjusted model

 

Point forecast:RM54,158m, Range forecast:RM60,930m-47,386

Seasonal difference model

 

Point forecast:RM53,434m, Range forecast:RM60,966m-45,902m

A word of caution however – the fact that monthly exports are now 10.8% off their recent peak (in seasonally adjusted terms), is more than a little worrying and evidence that faltering external demand is starting to dampen our recovery. Again, we’re looking at more signs that 2Q GDP growth will be well below the first quarter’s.

Technical Notes:

May 2010 External Trade Report from MATRADE.