OVERVIEW
May exports increased by 16.3%, outpacing consensus expectation for a 15.2% rise. This is due to continuously strong demand for E&E and commodity goods from the Asian and Western region. Exports is expected to continue being the main driver for economic growth this year, though we are expecting a slight tapering off in the 2H14 on account of a higher base effect. Nevertheless, this would be partly mitigated by continued improvement from the USA and parts of Europe.
· Exports in May expanded by 16.3% YoY, a slightly slower pace from the previous month’s 18.9%. This is on continued surge in demand for E&E and commodity goods from both the Asian regions and the developed West. On a monthly comparison however, exports fell by 2.0% whilst the seasonally adjusted term saw a decline of 1.1%. Year-to-date saw a 13.5% growth compared to a fall of 3.4% in the same period in 2013.
· Imports also performed strongly, posting an 11.9% growth, outpacing consensus’ estimates for a 7.7% increase. On a month-on-month basis, imports rose by 2.9% whilst the seasonally adjusted term saw a 3.5% increase. Year-todate saw an increase of 6.7% increase versus 5.0% in 2013.
· Due to the stronger-than-expected imports performance, trade surplus narrowed to RM5.7b from RM8.9b, but total trade increased by 14.2% YoY from 12.0% previously. Year-to-date saw trade surplus rising by RM40.9b compared to RM20.3b in the same period in 2013 and total trade increased by 10.2% from 0.5%. Exports saw a 12.4% increase in demand for E&E goods (32.7% share of total exports) and a 51.6% rise in shipment of petroleum products (8.2% share) as both volume (+35.1%) and average unit value (+12.1) increased. Crude petroleum (4.5% share) exports increased by 73.4%, also due to a rise in volume (+56.6%) and average unit value (+10.7). Though currently experiencing an advantage of higher oil prices due to supply worries on account of the situation in the Middle East, this may start to diminish in the future as global prices have begun to taper off. LNG exports (7.8% share) rose by 17.3% on account of a rise in volume (+6.2%) exported and it average unit value (+10.5%). Palm oil and its products (8.8% share) saw a 20.2% increase in exports, due to a 17.2% increase in demand for palm oil, attributed by a rise in average unit value (+16.3%) and volume (+0.8%).
· On shipment destination, exports to ASEAN (27.4% share) increased by 14.7%, led by demand from Singapore, which rose by 8.2%. Demand from Japan increased by 11.4%, largely on LNG and certain E&E products, mainly television reception apparatus. Shipment to the EU recorded a growth of 23.4% in May, the fifth consecutive double-digit expansion, led by the Netherlands (+33.8%), Germany (+17.6%) and the UK (+14.0%) on demand for E&E goods, palm oil and chemical products. We’re expecting further improvement coming from the EU on additional stimulus measures by the ECB to counter the threat of deflation. Exports to the USA increased by 13.8%, on demand for E&E as well as machinery appliances and optical & scientific equipment. Exports to China however, fell by 0.4%.
· Import on the other hand, saw an 8.5% rise in demand for capital goods (14.2% share of total imports), due to an increase in imports of transport equipment and industrial imports whilst intermediate imports (58.4% share) saw a 10.4% increase on demand for fuels, lubricants and industrial supplies. Consumption goods imports (7.2% share) rose by 4.9%, primarily on a rise in durables, nondurables and goods for household consumption. This shows that despite higher costs of living, demand from households still remains steady.
Outlook
· As exports continue to perform sturdily, we are optimistic on overall economic growth moving forward. The strength in exports momentum should be able to partly mitigate any downside pull in the 2H14 on account of a higher base effect, especially on expectation of improved economic condition in the US and parts of Europe as well as some expected recovery at the tail-end of 2014 from Japan. This allows us to keep to our GDP target of 5.5% for 2014, largely driven by exports and its positive spillovers in the economy.
Soure: Kenanga