Gross exports maintained a double-digit contraction of 13.1% y/y in Jul (Jun: 14.1%), steeper than our estimate (-10.5%) and Bloomberg consensus (-11.1%). Imports also kept a double-digit decline at 15.9% (UOB est: -18.5% vs Bloomberg est: -15.4%, Jun: -18.7%). This resulted in a smaller trade surplus of MYR17.1bn (Jun: +MYR25.8bn).  

Jul’s export decline was brought by a broad-based weakness across all three export sectors for a second consecutive month. Within the manufacturing sector, shipments of commodity-based products (i.e. refined petroleum, chemicals & chemical products, and manufactures of metal) dropped the most during the month as a consequence of subdued global demand and lower commodity prices. A persistent fall in shipments to key export destinations that included the EU, Japan, Hong Kong, India and ASEAN region fully offset the effects of a positive growth rebound in exports to the US and China.

Meanwhile, there are no signs of trade rebounding as yet given risks ranging from softening global growth momentum, increasing trade restrictions to climate shocks. China’s sagging economy further poses perils for countries around the globe while the possibility of a slightly more restrictive policy path in the developed markets would further tighten global financial and credit conditions that will subsequently weigh on global trade. This coupled with unfavourable base effects continue to reinforce our 2023 full-year export outlook at -7.0% (BNM est: +1.5%, 2022: +24.9%).