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Exports of Malaysia surprised on the downside, with key drag received from the overseas shipments of crude oil and manufacturers of metal and metal products. Also, recovery in the key electronics sector remains dull and continues to be on a timid path. Overall export outlook is expected to remain cloudy amid weak external demand.
The headline number surprised on the downside, declining 3.0 percent y/y, a reversal from the modest expansion of 1.5 percent previously. Import growth was almost flat at -0.1 percent, which thus translates into a trade surplus of MYR 7.6 billion for the month.
Exports of crude oil declined 26.8 percent, while Liquefied Natural gas (LNG) fell 20 percent in terms of overseas shipments. While exports to Singapore and US have recorded robust growth, they have been offset by declines in export sales to Japan, Hong Kong, China and Thailand.
A sub-par export performance and its consequential effect on growth will likely tip policy decision towards another monetary easing later this month. Earlier on, the central bank unexpectedly cut interest rate in July to mitigate against potential downside risk to growth and inflation.
Indeed, the benign inflationary pressure at present and the downside risk on growth will likely prompt the central bank to ease monetary policy again in the next meeting, DBS reported.
