Tag: trade

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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

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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

[2774] TPP is not just about the US

Among those who oppose the TPP in Malaysia, the US is on their crosshair, always. The opposition is so US-centric that I wonder whether they are anti-TPP, or anti-US. Malaysia has signed several other FTAs in the past years and negotiating more but you do not hear any complaint against those. Among the pro-TPP too, whether it is about trade or involving some kind of geopolitical babble, more often than not, it is about the US and sometimes about Malaysia too.

Yet, Malaysia is negotiating the TPP with 10 other countries and there is hardly any question asked about what these countries want out of Malaysia and what Malaysia would get out in return. Judging from various reports, it is quite clear that what Japan wants is very different form what the US wants, never mind the exemptions requested by all countries to accommodate their domestic political reality. But there are not many questions asked on this front.

Granted, Malaysia has active FTAs with six other TPP countries — Australia, Brunei, Japan, New Zealand, Singapore and Vietnam — through the Asean trade system. There is even one between Malaysia and Chile. The TPP could very well replicate those existing FTAs. But the question I would love seeing asked and answered is how TPP would change the existing ties. Is there any new special request between these countries?

And we know, the TPP has more depth than any of the previous FTAs Malaysia has signed.

What about others that we do not have a treaty with, like, besides the US, Canada, Mexico and Peru? We would have to discuss with them from the ground up. No, there is no question asked here too.

During the Malaysia-Singapore Retreat earlier this week, Singaporean PM Lee Hsien Loong mentioned the TPP. In this video, he mentioned it at 1:11:

That was a chance to ask specific Malaysia-Singapore issues within the TPP. But nobody asked them there. I do not even see any analysis about the TPP coming from the annual retreat.

So, I think this is the area where the debate in Malaysia at least should spread out to.

Categories
Economics

[2700] It is not the end of the world, but that is a bad trade number

Malaysian exports continue to take a hit. This time, it contracted by close to 6% in May. Imports also decreased. Those domestic cylinders better get going.

Malaysian May 2013 Exports

Categories
Economics

[2622] A large open economy is pretty close to a closed economy

The United States Federal Reserve has come under criticism for its third round of quantitative easing – or QE3 – from many countries, especially emerging ones, who are concerned it will lead to the creation of asset bubbles that will cause problems within their economies.

What will be the effect of this QE3 on Singapore’s economy and how is it likely to affect its people in general?

In QE3, the buying of mortgage-backed securities by the Fed will increase the money supply in the US economy and, given the Fed’s policy of low interest rates, the additional money is intended to spur spending by individuals.

The idea is that this increased spending will improve the housing market as well as other industries, which are then likely to employ more workers, thus reducing unemployment. Unfortunately, this scenario is likely to happen only when an economy is a closed one – that is, there are restrictions on trade and capital flow across countries. [Sundaram Janakiramanan. QE3 and the S’pore economy. Today. November 1 2012]

But, but, but… is it not that a large open economy that the US is is pretty much close to a closed economy, professor?