Wednesday, August 4, 2010

June 2010 External Trade

How the economic picture can change in just a month! In the last trade report, the stagnation in exports fooled virtually everyone (including me) into thinking that growth in 2Q2010 was likely to slow a lot. But a strong IPI reading suggests otherwise, to the point where the government has flip-flopped from thinking about needing to add further stimulus, to being bullish on 2Q growth.

In the same vein, don’t read too much into this month’s export numbers either – they’re not great (log annual and monthly changes; seasonally adjusted):


Exports have now been flat for almost three months running (even if the annual growth rates look good), although we are seeing an uptick in imports. As a result, the trade balance has hit its lowest point in three years (RM millions):


The good news, if you can call it that, is that imports of intermediate goods (which form inputs into local production) is still on a pretty strong uptrend (RM millions):


…which makes a strong case for at least sustained industrial production in June – we’ll find out in about a week from now.

The June numbers hit the middle of my forecast range almost precisely, and I’m hoping that July will be the same – they’re both suggesting a bounce is coming:

Seasonally adjusted model


Point forecast:RM55,597m, Range forecast:RM62,561m-48,633

Seasonal difference model


Point forecast:RM56,793m, Range forecast:RM64,821m-48,764m

Technical Notes:

June 2010 External Trade Report from MATRADE.