PETALING JAYA: Malaysia’s exports for the month of March will see a somewhat tepid recovery from the contraction seen in the previous month but indicators show that shipments may slow in the coming months.
A survey shows that economists expect exports to recover and rise by 2% in March compared to the corresponding month of a year ago. February’s exports had declined 2% year-on-year. The Statistics Department would be releasing the external trade data on Friday.
Economists expect imports, an indicator of future demand, to fall 3% after dropping 2.8% in February, against 11.6% growth in January. Part of the drop can be attributed to the high base of last year.
Overall, they expect a trade surplus of RM9.6bil for March, up slightly from RM9bil a month earlier.
Alliance Bank chief economist Manokaran Mottain told StarBiz that while exports would likely improve by 2% y-o-y, he predicts March to be “yet another weak month” in terms of export performance.
“I foresee the exports in March to be better than a month earlier and on a year-on-year basis. The electrical and electronics segment will continue to be the key driver for Malaysia’s exports.
“However, despite the slight improvement in export figures, sentiment is still moderate. Concerns on the potential impacts from the trade war between the United States and China and the uncertainties revolving around the US Federal Reserve’s interest rate decision are the major factors behind the mixed sentiment,” he said.
Another indicator of future demand in the manufacturing sector, the Nikkei Malaysia manufacturing purchasing managers’ index (PMI), which measures new orders and inventory levels among others, fell in February and March. A drop below the 50-point level indicates a conntraction. The data indicated a reduction in new orders as demand remained weak.
The country’s factory output, as measured by the industrial production index, has also been expanding at a slower pace, up 3% in the first two months of the year. MIDF Research had earlier noted that factory output would likely expand at a moderate pace for the first-half of the year.
Socio-Economic Research Centre executive director Lee Heng Guie sees Malaysia’s March exports rebounding by about 2.3% y-o-y.
He said the continued demand for electrical and electronics products, which accounted for 35% of total exports as of February, will continue to underpin the country’s overall exports in March.
He added that the demand for crude oil and liquified natural gas exports would also support the export momentum.
“After a surprise contraction in February, partly attributed to shorter working days, exports will likely improve in March.
“Amid the strengthening of ringgit which would reduce the exchange rate valuation effect, the lingering uncertainty about the trade tension between the US and China dampening global trade growth could pose a risk to the country’s exports moving forward.“Malaysia’s imports are expected to decline for the second consecutive month in March, largely owing to a high base effect last year,” said Lee.