Economists see improvement in August headline export numbers

MALAYSIA'S headline export numbers in August 2009 should provide more encouraging signs of recovery although the path is not likely to be a straight one, say economists.

A Business Times poll of 19 economists expect that exports to show an average contraction of 16.48 per cent, while imports will post an average decline of 17.90 per cent. Trade surplus is expected to reach RM8.85 billion.

The International Trade and Industry Ministry will release the data today.

Exports in July shrank by 19.5 per cent, with imports suffering a contraction of 14.10 per cent.

DBS Bank economist Irvin Seah expects exports to register the smallest decline in the last nine months, and a marked improvement from the previous month.

"The story behind the significantly better year-on-year export number in August rests on the fact that the high base effects last year will dissipate in the month as commodity prices peaked in July and started their descend from August onwards," he said.

"The high commodity prices last year have masked the steady improvement made on the export front, which is only visible if viewed from a sequential or level terms basis."

Seah also expects the headline export growth year-on-year to turn positive from October onwards if the current steady pace of recovery is maintained.

"Malaysia's export performance has so far been tracking the recovery in the global economy well and we should continue to see steady improvement in the headline number going forward," he added.

Gross domestic product should show positive growth in the fourth quarter of this year.

US investment bank Citi economist Kit Wei Zheng is looking at a 0-5 per cent export growth on a month-on-month basis, which is lower than the 10-year average of 1.8 per cent for the month.

"We expect electrical/electronics to continue to lead export performance as orders pick up and domestic supply bottlenecks ease.

"Leading indicators such as global purchasing managers' indices (PMIs) have moved into expansionary territory in recent months, which should provide some support for exports over the next few months," Kit said.

He added that the slight dip in the US ISM PMI in September to 52.6 from 52.9 in August suggests that the recovery is not likely to proceed in a straight line, with an easing of momentum possible in the fourth quarter or early 2010.

Standard Chartered Bank economist Alvin Liew said while the fall in export value of commodities will continue to be the main drag on Malaysian exports, the pace of decline is likely to ease below -20 per cent year-on-year.

"Electronics exports should also continue to be lacklustre. With the pace of import decline expected to ease as well, this would translate to smaller trade surplus compared with those seen in 2008," Liew said.