OCBC Malaysia gave its assessment on the latest trade data released by the Ministry of International Trade and Investment and by the looks of it, the report isn’t very encouraging.
Compiled by Senior Analysts Lavanya Venkateswaran, she noted the country’s August export growth figure was disappointing, it was worsening to -18.6% YoY from -13.0% in July (OCBC: -11.1%; Consensus: -16.3%). Similarly, imports she said were also disappointing dropping by 21.2% YoY from -16.1% in July. As a result, the trade surplus remained broadly stable at MYR17.3bn (versus MYR17.4bn in July).
She noted export weakness was broad-based with electronics exports reversing its recent uptrend. Electronics exports fell by 15.3% YoY in August after rising for three consecutive months through to July. This drop underscores the difficulty in credibly deciphering a turning point in the electronics export cycle. Meanwhile, exports of other manufactured goods such as machinery and ‘optical & scientific equipment’ were also weak in August, as were exports of commodities such as palm oil, rubber, crude petroleum, and LNG.
By destination, exports to all key markets were underwhelming, pointing to specifically exports to China which contracted by 20.3% YoY from +6.1% in July while exports to the US fell by 9.7% YoY from +2.2% in July. Exports to Singapore also stayed weak at -19.3% YoY versus -19.6% in July.
The drivers of the import growth slowdown were more mixed. Capital goods import growth picked up to 5.4% YoY from -4.3% in July but was more than offset by weaker growth in intermediate (-22.6% YoY from -20.8% in July) and consumption (-5.4% YoY from 2.8% in July) goods imports.
August trade data, taken together with data for July, shows that external growth momentum has remained lackluster in 3Q23. This remains broadly consistent with OCBC’s forecast for GDP growth to remain subdued at 4% in 2023. Despite the weaker growth outlook, Lavanya expects BNM to remain on hold for the rest of 2023.