September was not a pretty month for Malaysian exports.<\/p>\n
Exports for the month fell 6.8% from a year ago. When seasonally-adjusted, it still dropped 3.6% month-on-month. The decline was definitely caused by lower export volume, which points towards weaker global demand. But we know this already: trade war is bad for Malaysia. Once it gets bad enough, no trade diversion will be good enough to fight off reduction in global trade volume.<\/p>\n
But what is more interesting to me is the import data and by proxy, domestic demand. September imports rose 2.4% year-on-year. Seasonally-adjusted imports were also marginally up. Imports are a proxy of domestic demand and import growth suggests a growing domestic demand. This is a good news.<\/p>\n
There had been concerns over the health of domestic demand recently. Why? Because imports had been falling badly starting from June until August, while seasonally-adjusted figures had been giving mixed signals. From here alone, it was difficult to decide whether the June-August import decline was due to weakened domestic demand or just due to high base effect created by tax-free period. As a backgrounder, the GST was zerorized beginning June 1 and was finally replaced by the SST on September 1.<\/p>\n
The September 2019 numbers have now given us the answer: it was largely due to the tax-free period and the high base effect it created.<\/p>\n
If the June-August import decline was truly largely about weakened domestic demand, that decline would have persisted into September. But it did not. In fact, there was a significant break: capital, intermediate and consumption imports all had big jumps in September. This is typical of base effect that riddles year-on-year calculation every time there are big changes.<\/p>\n