Slower exports in June due to festivities

KUCHING: Exports growth slowed to 10 per cent year on year (y-o-y) last month, mainly due to a deceleration in exports and also due to a longer holiday break during the Aidil Fitri celebrations whereby some exporters might have frontloaded their shipments to the previous month.

RHB Research Institute Sdn Bhd (RHB Research) saw that exports slowed in June after growing by its strongest pace in more than seven years of 32.5 per cent last month, and compared with 20.6 per cent in April.

“The slowdown was mainly due to a deceleration in exports of nonelectrical and electronic (E&E) and E&E exports amid a higher base,” it said in a note yesterday.

“Also, it was partly due to a longer holiday break during the Hari Raya Aidilfitri celebrations, whereby some exporters might have frontloaded their shipments to the previous month.”

Stripping out the currency factor and measured in US dollar terms, the firm ntoed that exports slowed to 5.1 per cent y-o-y during the month, from 24.3 per cent in May and compared to 6.7 per cent in June.

The slower growth in June was in line with RHB Research’s expectations that export growth would normalise in 2H17F, as demand from China slows and the low base effect is expected to fade while the ringgit recovered slightly.

Meanwhile, the team over at Kenanga Investment Bank Bhd ( Kenanga Research) said the moderation in export subcomponents was largely broad-based with some of these components seeing a contraction in exports instead.

However, the LNG exports notably bucked the trend, and instead grew by 97.3 per cent, contributing to three percentage points to headline export growth.

Separately, palm oil – including crude and processed – grew by a more modest 15.8 per cent though due to its scale contributed to 1.3 ppts to headline export growth.

Kenanga Research also saw a harp deterioration in import growth., whereby import growth moved into single-digit territories at a mere 3.7 per cent growth – easily missing both the consensus expectation for 19.8 per cent growth and the house expectation of a 20 per cent growth.

“Slower import growth was particularly striking after it hit its highest level since May 2010 during the previous month,” ir added.

“June’s sharp import growth moderation rounded off growth in the second quarter of 2017 to 19.1 per cent y-o-y though this was still elevated in the context of singledigit quarterly import growth rates from 2014 to 2016.

“In monthly terms, imports declined by 14.5 per cent, close to the seasonally adjusted monthly decline of 14.4 per cent.