Global demand expected to remain soft in Q2

PETALING JAYA: Demand for goods will still be soft in the second quarter despite the gradual reopening of economies around the world from the lockdowns that have been imposed by various governments.

Maybank Research said final demand from global economies would be impacted from the new normal of social distancing and preventive health measures that would result in patchy economic activities.

“There are prospects of still weak final demand due to dented consumer and business confidences in advanced economies given the rising unemployment rates and business bankruptcies,” Maybank Research said.

Commenting on the trade figures that had been released by the Statistics Department, Maybank Research said that shipments to most key export destinations were down with the exception of the Asean region which grew 3% year-on-year (y-o-y) and South Korea

11.8% y-o-y.

“Shipment to Asean gained on account of Indonesia 100.5% y-o-y in March due to the surge in the exports of machinery and transport equipment 450% yoy and mineral fuels 98.6% y-o-y,” the research house said.

The gains were followed by gains in exports to other Asean countries including Singapore and Philippines which had offset the losses to Thailand -37.4% y-o-y in March and Vietnam -31.4% y-o-y.

Affin Hwang Capital Research exports to Asean countries had been supported by higher exports of manufactured goods.

It said exports to China, the country’s main trading partner, had declined by -6.1% y-o-y in March led by lower demand for electrical and electronic goods and petroleum products.

Exports to the US had also declined by -3.6% y-o-y in March on lower exports of optical and scientific equipment, electrical & electronic products, transport equipment as well as iron and steel products.

Gross imports of the country had also decreased by -2.7% y-o-y in March, which is the sharpest decline experienced since Nov 2019, Affin Hwang Research said.

“Imports of capital goods declined sharply by -47.5% y-o-y in March, dragged down by lower imports of transport equipment for industrial, particularly aircraft and parts,” it said. Affin Hwang said that this reflects weak investment activity during the month.

It said also that moving forward it is expecting external demand to continue to remain weak moving forward on the economic impact of the Covid-19 lockdowns worldwide.

Affin Hwang said that this would dampen the manufacturing sector, especially the export-oriented companies.