Posted on 08 Dec 2009
The strong trade performance for October has caught many economists by surprise with some wondering if the momentum in external demand can be sustained.
“The rebound in global economy is benefiting
On a month-on-month basis, exports grew by 15%.
Maybank said the fasting month of Ramadhan and the subsequent Hari Raya holidays between late August and late September partly explained the month-on-month surge in exports in October following the sluggishness in September.
“Export data for Malaysia and Indonesia, the two Muslim-dominated countries in the region, show that these two economies outperformed other regional economies in terms of the month-on-month export growth in October after underperforming in September,’’ it said.
AmResearch senior economist Manokaran Mottain noted that the figures in October compared four weeks of work with three weeks in September due to the festive season.
The same goes for the year-on-year data as the Hari Raya holidays in 2008 were in October.
“You are comparing against seasonal variations,’’ he explained, adding that while the economy had seen its worst days, the latest data could not be taken as a firm trend.
“I would rather wait for November before revising my outlook for the economy,’’ he said.
OSK Research said the better showing was mainly due to a historically strong month for the semiconductor industry as equipment manufacturers ramp up production for the holiday season.
“Still, the recovery in global chip sales could falter due to mounting unemployment going into next year, especially in the United States, and the expiry of various incentives at the end of this year,’’ it said.
The research house said the pace of improvement in external trade for major developed economies was sluggish and likely to experience double digit contraction in the upcoming months as unemployment would continue to dampen consumption.
“Given the surprisingly good trade performance supported by intra-regional demand, we are now more confident that
Citigroup economist Kit Wei Zheng, in his note, said the October numbers were probably a signal of the long overdue cyclical catch-up story for Malaysia, in line with most other regional tech exporters (except for Singapore), which should be translated into the still weak manufacturing output numbers before long.
“However, given the choppy nature of E&E exports in recent months, this catch-up may not take place in a straight line, with a month-on-month technical pullback in November entirely possible.
“While recent upside surprise in October export figures suggest that the cyclical export recovery is gaining traction in Malaysia, we suspect that structural issues that preceded the recession could continue to be a drag on Malaysia’s manufacturing sector, after the initial bounce,’’ he said.
Affin Investment Bank, in a note, said that while
“Going into 2010, as domestic demand recovers, and with the private sector taking an active role in driving economic growth, imports are expected to gradually increase at a steadier pace together with the recovery of exports,’’ it said.
“We are projecting export growth to recover and increase from -15.4% in 2009 to around 9.9% in 2010, while import growth will recover more strongly from -15.2% to 18.8% during the same period.”
