Tag: imports

Categories
Economics WDYT

[2822] Guess Malaysia’s 1Q16 GDP growth

I have been slacking off a little bit. My models have not been updated as frequently as it should. Reason is, one fine March day, something wiped the models out. Electrons arranged neatly disintegrated into disorder, destroying the microfoundations (heh!) of my models.

I have backup files, but updating them is a tedious exercise.

So, my projections, especially on quarterly basis might be off for now.

Nonetheless, it does not take much effort to look into the latest data.

And I cannot find much stuff to celebrate.

The full industrial production index for the first quarter is not out yet but for February, production grew only 3.9% YoY. Remember, 2016 is a leap year and in essence, people produced more this year compared to the last just because of the extra day. So normalized growth will be lower than that. At the same time, with all the heatwave going on, I think we also need to discount electricity production spike. It is very likely the electricity generated mostly went into cooling purposes instead of for manufacturing. My electricity bill spiked by about 100% in March. Some of my friends had it worse.

February 2016

I am unsure how much the electricity generation surge is due to mining growth recovery (is it a recovery?) however. I can run a regression model I suppose, but meh. Looking at the lines alone can tell you much about the correlation.

The new core inflation published by the Department of Statistics appears stable, suggesting consumption growth might be stable too. But who knows. With the way economy is going, there might be enough slack that increased economic activities would not affect inflation much. Import expansion for the quarter was uninspiring as well, pointing to the possibility that the economy did not go far enough toward fulfilling its potential. Stable (and low?) inflation and weak import growth mean weak consumption growth.

Export growth is also not convincing by the way.

Government spending growth might be hurting. For most of the first quarter, Brent prices were below $40 per barrel and the government really wanted to cut its deficit still. Things might be better in 2Q16, but not before as far as public expenditure is concerned.

In the end, I think growth might be about the same as the last one. Might be slightly slower too for all I know. In 4Q15, the Malaysian RGDP grew 4.5% YoY.

Maybe you know better?

The Department of Statistics will release Malaysia’s GDP figures on Friday, May 13.

How fast do you think did the Malaysian economy grow in 1Q16 from a year ago?

  • 3.0% or slower (8%, 1 Votes)
  • 3.1%-3.5% (8%, 1 Votes)
  • 3.6%-4.0% (23%, 3 Votes)
  • 4.1%-4.5% (54%, 7 Votes)
  • 4.6%-5.0% (8%, 1 Votes)
  • 5.1%-5.5% (0%, 0 Votes)
  • Faster than 5.5% (0%, 0 Votes)

Total Voters: 13

Loading ... Loading ...
Categories
Economics

[2789] What happened to second quarter consumption imports?

There is something quite weird going on in the imports data.

In the last quarter, we all know we had GST for the first time. It replaced an older consumption tax. After all have been said and done, the effective rate was higher than it was under the old regime. That means higher tax. You could also see it in the inflation figure that hit 2.4% YoY in May from almost 0.9%% in March when retail petrol prices took a dive.

There were concrete proofs of frontloaded purchases happening from the 2015 first quarter GDP statistics. From the 2014 fourth quarter even. Consumers did buy everything to avoid paying the new consumption tax. It happened on a scale grander than the ridiculous lines formed at the petrol station each time a price hike was announced. The GDP consumption component rose 8.8% from a year ago in 2Q15 at a time when credit growth was very weak. Bank loans used to increase more than 10% YoY each month. Now, it is about 9% YoY. All those lending requirement tightening are working.

201508GDPCvsLoanGrowthMalaysia

There is not much correlation from the chart above but the theory is, weak credit growth should affect spending growth negatively. Less money for everybody. The GDP consumption spike is jarring in that aspect, lending credence to the frontloading theory.

If the theory is right, we should see considerable weakness in private consumption growth in the second quarter. And there are quite widespread anecdotes of weaker consumer activities all around. Some statistics like car sales are extremely weak, providing more concrete proof to rely on.

On the surface, merchandise imports data suggests the same thing. In terms of value, it fell 5.2% YoY in the second quarter. In term of volume stripping off the price effect of depressed commodity prices like crude oil, gas, palm oil and rubber, it fell about 4.8% YoY in the same quarter.

So far, so good for the frontloaded purchase theory.

But there is a wrinkle.

Malaysia is a huge trading nation and it is an integral part of the global supply chain. We import not just end goods but also intermediate goods used for the production of other goods. Some are reexported.

Deep down beyond the import headlines, we can see some of these at work. The cause of import contraction however does not seem to be weak consumption growth. In fact, imports of consumption goods have been growing strongly despite the GST in the second quarter (and also despite the weakening ringgit).

201508consumptionImportsJune2015Malaysia

I cannot drill down the category too deeply. So, I do not know the exact reason behind the increase in consumption goods. I have heard explanation that goes like this: the imported stuff were really luxury goods and demand for it had not really let up, suggesting a tale of two classes in Malaysia. But I do not know for sure.

The second quarter GDP numbers will be out next week. Perhaps that would provide some answer to the puzzle.

Categories
Economics

[2723] Is the weaker ringgit contributing to domestic inflation?

I have read in the media of allegation that the weaker ringgit is contributing to the rising inflation in Malaysia.[1]

The allegation makes sense. If Malaysia imports stuff, which the country does, and if the ringgit gets weaker, which it has (at least against several currencies and namely the US dollar), a weaker ringgit should contribute to domestic inflation. In the absence of data, I would support the idea of weaker currency is contributing to inflation.

Except, I am not entirely convinced by the data. In fact, the data is possibly telling me something to the opposite.

I have done some modeling in the past and it is hard to get a relationship between currency and inflation. At least, my modeling skills are not there yet, I would suppose. Even if I ignore all those econometric tests which the models failed, the effect of currency fluctuation under normal times, as I remember from those models, are so small that I would rather ignore them.

But here is something that does not rely on my econometrics. It is more straight forward in answering whether a weaker ringgit is contributing to domestic inflation. There are two possible proofs dismissing the role of the weaker ringgit.

The first is the producer price index (PPI) for imports. Crazily enough, it is still deflating and it has been deflating since January 2013 at the very least:

20140211PPIImportsDecember

One would expect, if the weaker ringgit was contributing to domestic inflation, the PPI for imports would increase and from there, the PPI inflation would somehow transmit to the consumers, affecting the CPI. I have not modeled this but the result for the a priori expectation that one needs to make the assumption that the weaker ringgit is contributing to domestic inflation is not going well here.

The second involves the import value and import volume growth. I have not thought of this thoroughly but if a weaker currency is contributing to domestic inflation, I would expect faster growth on import value than import volume growth. But in December, total import value (the one you see often in the press) rose 14.8% YoY. Volume grew 15.1% YoY. That means imports really are getting cheaper, corroborating the signal from the PPI imports.

So, is the depreciating ringgit contributing to the rising domestic inflation?

No. On the contrary, imports are a counteracting factor against inflation.

Again, this is just a preliminary thought that I just had. If my thinking holds, then I do not think the weaker ringgit is contributing to domestic inflation. At least not yet.

Right now, it seems, the rising CPI inflation in Malaysia is all caused subsidy cuts and domestic demand.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — A weakening ringgit currency, which is down 1.5 per cent since the start of the year and at five-month lows against the dollar, could add to upward pressure on prices through more expensive imports, and reinforce the case for raising interest rates. [Malaysia inflation jumps as government feels heat over living costs. Reuters. The Malay Mail Online. January 22 2014]

Categories
Economics

[2658] Quick reaction to Malaysia’s December economic figures

Export and import numbers for December 2012 do not look good. Export contracted by 5.8% while imports decreased by 6.5% from a year ago. Despite the bad numbers, industrial production index grew by 3.7% from a year ago.

I find this curious. Import contracted and that means the domestic economy might have slowed down. Exports contracted too and that means external demand did not do too well either. So, industrial index should take a hit but it grew anyway, albeit slower than the 7.1% growth in November versus a year ago. It is possible that there is a lag between the index and trade figures but strong index number last month did not reflect in this month’s trade figures.

Maybe the inventory went up. The fourth quarter GDP figures will be released later this month. We will see what happened to the inventory soon.