August 2010 External Trade:

Friday’s release of August trade data showed, quite frankly, some pretty awful numbers. But as I talked about last month the Ramadhan effect was likely to take a toll on the numbers anyway, so it’s not panic stations just yet, especially since there’s no breakout from last month’s forecast range (log annual and monthly changes; seasonally adjusted):

Taking away a slight uptick in June, we’re now in the fifth month of consecutive declines in exports (seasonally adjusted), and the third in imports. Given the structure of Malaysia’s trade, where much of imports are used as inputs into exports, there’s more than enough evidence here of falling external demand – it’s certainly not coming from lower commodity prices:

Breaking it down, the contraction was pretty much across the board, except for crude oil (log annual and monthly changes; seasonally adjusted):

How long this trend continues is still an open question, but I do expect some pickup as we move into the last quarter of the year, which usually shows a stronger seasonal effect. On that basis, I think September’s numbers will come closer to my forecast models’ point estimates, both of which are showing slightly higher numbers than August’s:

Seasonally adjusted model

 

Point forecast:RM51,010m, Range forecast:RM57,365m-44,654

Seasonal difference model

 

Point forecast:RM55,199m, Range forecast:RM62,960m-47,438m

Technical Notes:

August 2010 External Trade Report from MATRADE.