Tag: consumption

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Economics Society

[2952] When did dates become popular among Muslim Malaysians?

Dates now feel ubiquitous on Ramadan dinner tables among the Malay (and the wider Muslim Malaysian) community. Not only that, more often than not, they break fast with the fruits first.

Just the other day, somebody spotted me breaking my fast with something else (a glass of water), and the person commented how unusual my behavior was.

I found that comment very peculiar. Contrary the person’s assertion, I feel date-eating had never been normal in Malaysia. I remember a time when dates were not even at all popular. It was not even available in the Malaysian mass market easily unlike now. The Yusuf Taiyoob trend, in particular, is really a recent phenomenon appearing in the early 2010s.

I myself first tasted dates not in Malaysia, but at a mosque in the United States in the early 2000s. There was a large Arab community—Iraqis, likely due to the Gulf Wars—and they loved their dates.

That comment made me wonder, how and when did dates start to become popular?

I know how it became popular: many would tell you it is religiously preferable to break fast with fresh dates. It is sunnah, which means extra pahala, or merit for those practicing it. And during Ramadan, Mulims believe everything good has a big multiplier assigned to it, unlike normal times when one good deed is considered one. Do not ask me about how the scorecard works.

So when?

I figured, the best way to know when dates became popular in Malaysia, and to prove whether I was right (that is mass date consumption being a relatively recent phenomenon in Malaysia), is to look at trade data over the years.

Here, two public databases are helpful. First, the International Trade Center, a body under both the World Trade Organization and the United Nations. Second, the UN Comtrade Database. Unfortunately, the best I could get was data all the way back from 1989.

So, when did dates first becoming popular in Malaysia (within the confines of Ramadan)?

I will let the graph talk.

The chart suggests date consumption grew in popularity (within its own context) over time. More supply means more could consume it: at the very least, date import volume grew at a faster rate than population growth.

Specifically, 1989 date imports were approximately 440 g/person. It rose to 480 g/person in 2000. An increase, but not too much. But it surge to 640 g/person in 2010 and then 700 g/person in 2020. There was a big jump between 2000 and 2010. I think that says something.

Things changed some time in the 2000s or the 2010s, which coincided with the rise of Tunisia as an exporter to Malaysia. Prior to that event, China, Iran and Egypt were the biggest suppliers. Both China and Egypt have fallen off the rung since the last decade.

With that, I think I can say in the 1990s, it was not that popular. That justifies my experience. It is not me that is unusual. It is the community that has changed.

I also suspect date consumption was popular among rich Malays first, way way before. The culture became popular with masses later partly due to religious exhortation/advisory (sunnah) and a version of conspicuous consumption at work: a Veblenian way of saying rich religious people eat it, and if I eat it, I would be seen as a rich religious person too. This is probably harder to prove.

Finally, it is good to put the rising popularity of dates into context. These date imports are small compared to other (foreign) fruits. For instance, nearly 170,000MT oranges (citruses really), 150,000MT apples and 50,000MT grapes and the likes were imported in 2020. Compare that to the 2020 dates imports of 22,500MT.

Still, 2020 date imports were bigger than bananas. But Malaysians do grow bananas locally. So, it is not a proper comparison.

Categories
Economics

[2815] A hint of consumption recovery in the 4Q15 GDP

The 4Q15 GDP figures came out better than my expectation. I had projected about 4.3% YoY but the official figure came slightly higher at 4.5% YoY. However, it is still an overall slowdown as warned earlier.

GDP 2015Q4

But there is a good news here.

The blue line in the chart above representing consumption growth picked up. That is a green shoot, a hint that the economy might be turning around. Consumption weakness has been the number one reason behind the gradual slowdown we are seeing in the economy. This is why the slight uptick is an important point to note.

I do not have much details behind the stronger (but still weak!) consumption growth yet, but on the production side, there is a reason to be optimistic that this is not some no-good dead cat bouncing around. Based on the performance of the retail sector, consumers did buy more stuff:

GDP 2015Q4 production

There is also good news for people working in finance. The fourth quarter was less bad than 3Q15. The only real bad news is for people in mining. I am unsure if the drop it is all about base effect, but the situation in the oil and gas sector is not pretty regardless. I suppose QoQ readings would tell me more but I am in a hurry right now.

GDP 2015Q4 mining production

We are not out of the woods yet. Despite signs of a turnaround, the 4.5% YoY overall growth is still a slowdown. Consumption has to cover a lot of ground before we can claim to be out of the $700 million MYR2.6 billion hole. And I am worried about the employment rate given so many layoffs taking place late last year. The effects of those retrenchments might come too late to be accounted for in the 4Q15 GDP data.

Finally, for the lovers of headline figures, the curse of 1Q15 frontloading will bite back this quarter. Nevertheless, that will only be a mathematical quirk.

Categories
Economics

[2791] Frontloanding theory confirmed for 2Q15 GDP

Apart from the slowdown in consumption, I was wrong. The Malaysian GDP grew 4.9% from a year ago, considerably higher than what I thought it would be at 4.1%-4.2% YoY. Still, economic growth is decelerating quite drastically.

Malaysian GDP growth

Trade surplus did not improve as exports contracted worse than imports, and not the other way round as I wrote previously. Service trade and price factors have something to do with it since trade values published monthly had suggested otherwise. I had naively taken the number without taking into account export and import prices.

Meanwhile, investment growth crashed, becoming much weaker than what I expected. The Pengerang project has not created much dent yet.

But the two big things that caused me to miss the actual growth figure are inventories and government spending. I should have raised my inventory projection when the industrial figures come out respectably okay but the pessimistic me refused to do so. And I had expected with all the rage for deficit targeting, government expenditure would have taken a big hit (yes, I know the GDP government spending does not correspond exactly to actual federal government spending and there are other states’ government spending to account for). It grew in annual terms instead.

The thing that was really hard to get it wrong was consumption. The GST collected its toll. It was a stark slowdown, growing only 6.7% YoY after the 1Q15 8.8% YoY spike. Domestic demand growth decelerated to 4.6% YoY from 7.9% YoY in the same period.

A lot of people had expected a dip after the spike and they were right. The frontloading theory is right.

That has led me thinking about how much did consumers stock up on their foodstuff and other typical consumer non-durable goods. None of us has a warehouse to store a whole year worth of supplies.

This is a hard and important question. Whatever the answer is, it is the key to knowing when will spending normalization take place. When it happens, I think it is reasonable to expect a massive spike in consumption, at least on quarter-on-quarter basis.

If I had to guess, the normalization would probably start this quarter. We could see complete normalization by the end of the year.

Still, preempting the typical data for 3Q15, this quarter would likely be weak too and I feel we would only start getting better in 4Q15. The GST impact itself should be gone completely by 2Q16, if only because of mathematical artifact.

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

[2767] Deflation is coming to Malaysia. Is it bad?

January inflation clocked at only 1.0% from a year ago while in December it was 2.7%. That was a pretty drastic slowdown that I bet someone will cry deflation wolf somewhere soon.

The cause of the slackening is easy to explain. It is unambiguously due to the drop in retail petrol and diesel prices. RON95 fuel price, the most popular fuel in Malaysia by far, in January dropped from MYR2.26 per liter to MYR1.91 in December. Diesel went down 30 sen to MYR1.93 per liter in the same period. In January 2014, RON95 was MYR2.10 per liter.

At this rate, Malaysia might be seeing actual deflation this month. In February, both RON95 and diesel went down further to MYR1.70 per liter. The drop in yearly terms in February 2015 is greater than that seen in January because in February 2014, RON95 was MYR2.10 still. In January 2015, it fell 9% YoY. In February 2015, it decreased 19% YoY.

In fact, on monthly terms, we are already in deflation. This is not your monthly, seasonal price fluctuation that people usually ignore and say, ah, it is nothing. This is a clear deflation.

Is this deflation something to worry about?

No. I do not think so.

Deflation these days connotes bad news. Japan and Europe are trying hard to avoid deflation. In Singapore, deflation played a role in convincing the monetary authority there to loosen up its forex policy, which is their monetary policy. And the last time Malaysia had a deflation, it was during the 2009 recession.

But not all deflation are the same.

In Japan and Europe and Singapore today, and Malaysia in 2009, deflation came about from reduced economic activities. There was less demand and so, price pressure was weak and that pulled prices down. It was demand-driven. In fact, we really are worrying about demand rather than price itself. Price changes — inflation or deflation — are usually a symptom of something else.

Unlike in 2009, the (possible) February deflation would be supply-driven. The weakening in prices has been supply-driven in the sense that technological improvement — all the talk about shale mining that is turning the US into the world’s largest oil producer — has created oil glut in the market.

I do not worry because this is the same pressure that forced computer prices down over the decades. It is a kind of pressure that makes a typical person feels richer because he or she could now buy something else with the same amount of money and still afford the same quantity of fuel or more. Or save them. I do not see a price-wage spiraling down out of control here. The price deflation does not make them feel poorer because the deflation does not come about from them losing them job or suffering a pay cut. There are news of some retrenchment in the oil and gas sector but the size is small so far, as far as I know and besides, the sector is not the biggest contributor to the Malaysian economy. Indeed, the biggest sector, electronics, is having swell of a time and being ignored by the press.

I also do not worry about deflation because fuel is not something a typical consumer can live without for too long. Deflation can be disastrous to the economy in the sense that people would stop buying or postpone their purchases until prices fall further to stabilize at some low prices. But with fuel, I do not think you can do that to the point it would adversely affect growth. Fuel is an essential good and you just have to use them, especially in a society that is so dependent on combustion-type vehicles. If you do wait out, then you might not be able to drive or get to somewhere at all. You just need them and you will keep buying it even when you know prices are falling.

More importantly, the postponement of purchase is dangerous to growth especially when consumers do not know when prices would bottom out. So, they keep holding back and then not making purchases at all. This can be particularly devastating for fixed assets like homes and durable goods. In the case fuel prices, it does appear prices have bottomed out, especially since the prices used for the determination of petrol prices in Malaysia is lagged by a month, as I have explained previously. If global crude prices hold at the current level at about $60 per barrel compared to $45 in mid-January, it is very likely that retail petrol prices will be higher in March next month. So, a February deflation will be temporary. This also means people would line up at the gas stations at the end of this month preempting the loophole that comes with Malaysia’s imperfect dirty float system. So, instead of being encouraged to postpone purchases, they will hoard them instead.

Before I end, I am not saying there is no problem with demand. I still worry that consumption growth is slowing despite the surprisingly strong expansion last quarter. But the possible deflation in February is very much driven by the supply-side, and not demand.

So, do not worry about the deflation.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s — I am tempted to say yet another reason why I was not worried about deflation, but decided the argument is problematic. That argument goes: core inflation is still more than 50 basis points above headline inflation. Since core inflation is more reflective of demand, and since it strips fuel away and therefore free from supply-driven inflation/deflation seen in January, it suggests demand is going well. But I checked the data from 2008-2009 and core inflation was somewhat healthy despite the fact there was a recession. This probably shows core inflation is an imperfect measurement of demand change.

I am putting it at the postscript to catalog my own thoughts on the matter and revisit it later.