{"id":15083,"date":"2015-08-06T19:26:58","date_gmt":"2015-08-06T11:26:58","guid":{"rendered":"http:\/\/maddruid.com\/?p=15083"},"modified":"2015-08-06T19:41:00","modified_gmt":"2015-08-06T11:41:00","slug":"2789-what-happened-to-second-quarter-consumption-imports","status":"publish","type":"post","link":"https:\/\/maddruid.com\/?p=15083","title":{"rendered":"[2789] What happened to second quarter consumption imports?"},"content":{"rendered":"

There is something quite weird\u00a0going on in the imports data.<\/p>\n

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\u00a0higher 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.<\/p>\n

There were concrete proofs\u00a0of frontloaded purchases happening from the 2015 first quarter GDP statistics. From the 2014 fourth quarter even. Consumers did buy\u00a0everything to avoid\u00a0paying\u00a0the 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\u00a08.8% from a year ago in 2Q15\u00a0at 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.<\/p>\n

\"201508GDPCvsLoanGrowthMalaysia\"<\/a><\/p>\n

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.<\/p>\n

If the theory is right, we should see considerable weakness in private consumption growth in the second quarter.\u00a0And 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.<\/p>\n

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\u00a0depressed commodity prices like crude oil, gas, palm oil and rubber, it fell about 4.8% YoY in the same quarter.<\/p>\n

So far, so good for the frontloaded purchase theory.<\/p>\n

But there is a wrinkle.<\/p>\n

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.<\/p>\n

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\u00a0(and also despite the weakening ringgit).<\/p>\n

\"201508consumptionImportsJune2015Malaysia\"<\/p>\n

I cannot drill down the category too deeply. So, I do not know the\u00a0exact reason behind\u00a0the increase in consumption goods. I have heard explanation that goes like this: the imported stuff were\u00a0really 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.<\/p>\n

The second quarter GDP numbers will be out next week. Perhaps that would provide some answer to the puzzle.<\/p>\n","protected":false},"excerpt":{"rendered":"

There is something quite weird\u00a0going 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\u00a0higher tax. You could also […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[731,304,1021,1379,142],"class_list":["post-15083","post","type-post","status-publish","format-standard","hentry","category-economics","tag-consumption","tag-gdp","tag-gst","tag-imports","tag-trade"],"_links":{"self":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15083","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15083"}],"version-history":[{"count":4,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15083\/revisions"}],"predecessor-version":[{"id":15089,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15083\/revisions\/15089"}],"wp:attachment":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15083"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15083"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15083"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}