08/12/2012 (The Star) - Malaysian exports dropped 3.2% year-on-year in October on the back of weaker demand for commodities from China and Japan but it was within the market consensus estimate.

October's exports totalled RM61.3bil compared with RM63.3bil in October 2011.

The drop was attributed to the continuous impact of the eurozone crisis and slower growth momentum in China and India in a statistical report released yesterday by the Statistics Department.

The decline in exports in October is a contrast to the growth of 2.6% seen in the previous month.

Imports were higher by 5.7% to RM51.71bil from a year ago due to higher imports of capital goods and intermediate goods.

Alliance Investment Bank Bhd chief economist Manokaran Mottain said the drop in exports had come within the market consensus estimate, as well as the research house's estimate.

Market consensus was for a 3% drop in exports, while Alliance's estimate was set at a 2% drop.

“While this was Malaysia's third decline over the last four-month period, the larger decline could also be attributed to high base effect from a year ago, which is RM61.3bil versus RM63.3bil in October 2011,” he said.

Manufactured goods exported within the month came to RM39.99bil, making up 65.2% of exports. Year-on-year, exports of manufactured goods fell by 3% due mainly to lower exports of chemical and chemical products, palm oil, among others. The decline was however offset by stronger growth in electrical and electronic (E&E) demand and optical and scientific equipment, due to higher demand mainly from the United States.

Major exports products in October include E&E products valued at RM19.84bil, refined petroleum products valued at RM6.04bil, palm oil worth RM5.22bil, liquefied natural gas valued at RM4.46bil and chemicals and chemical products which brought in RM3.95bil.

It is notable that E&E products comprised 32.4% of exports.

Exports to Asean and the United States in October expanded by 8.9% and 11% respectively. However, there was a sharp decline in exports to China, Japan and the European Union, contracting by 15.3%, 14.4% and 14.2% respectively.

Mottain said lower demand for crude palm oil and rubber from China and India contributed to the overall decline to these countries.

“Moving forward, we expect the volatility may remain, although global uncertainty may have subsided greatly in line with the improvement in global Purchasing Managers' Index (PMI) indices available for November,” he said.

Even as volatility in global trade is expected to remain brought on by continued uncertainties in the eurozone and other major economies like the US and Japan, the improving domestic conditions in China would help negate it.

Total trade for October increased 0.6% or RM712.7mil to RM113bil mainly contributed by higher trade with Asean, bringingtotal trade for 10 months to RM1.1 trillion, representing a 4% increase from a year ago.

“We have recently raised Malaysia's full-year GDP estimate to 5.2%, with an expected forecast at 5% in the final quarter, driven by sustained strong domestic demand activities led by the ETP (Economic Transformation Programme),” said Mottain.