January 2012 External Trade: In The Dumps

Yesterday’s external trade report showed Malaysia’s exports following the regional trend (log annual and monthly changes; seasonally adjusted):

Exports barely grew over the previous year, while monthly growth measures turned negative for both exports and imports. It’s not entirely unexpected, as trade numbers from across the region have retreated.

But it’s not all bad news. More than half the drop between December and January came from just three countries: China, Singapore and Hong Kong (in that order). The obvious implication is that the lunar new year holidays has had a more than usually strong effect. In China for instance, the country effectively shuts down for three weeks after the beginning of CNY.

Another factor to consider is that slow growth is largely due to the base effect (RM millions; seasonally adjusted):

Export growth measures are only starting to show what a look at the levels should make clear – Malaysia’s exports have been essentially flat for the past year. Growth numbers flattered to deceive, because export values in 2010 weren’t that great (shaded area in the chart above).

So I’m not going to start thinking that January’s poor numbers mark the start of a new cyclical downturn just yet, unless we see some unusually strong corroboration in the February numbers. For one thing, there seems to be a divergent trend between the trade figures and industrial production numbers in some countries like Korea. If that happens here (January IPI is due out on Monday), then I think we can take January’s export numbers as a one-off blip.

That’s not to say that everything’s fine. If exports aren’t truly shrinking, they’re not exactly growing either. But I do think that if CNY has had that big of an effect, the February export numbers should remain depressed:

Seasonally adjusted model

Point forecast:RM59,833m (18.7% yoy, 8.3% mom)

Range forecast:RM67,371m-52,295m

Seasonal difference model

Point forecast:RM52,286m (5.2% yoy, -5.2% mom)

Range forecast:RM59,737m-44,834m

Technical Notes:

January 2012 External Trade Report from MATRADE.