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Import drop flagged, as exports post first fall in 6 months

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THE COUNTRY’s trade gap shrank from a year ago in September as a bigger decline in merchandise imports tempered the impact of the first drop in six months for foreign sales of Philippine goods, according to data which the Philippine Statistics Authority (PSA) released on Wednesday.

Philippine merchandise exports fell by 2.6% to $5.898 billion in September — the first time in six months that sales abroad of Philippine goods declined — while imports dropped for the sixth month in a row by 10.5% to $9.017 billion.

That made the trade deficit narrow by 22.5% to $3.119 billion in September.

While they said exports’ drop was to be expected in the face of a raging Sino-US trade war, private sector economists took particular note of the “surprising” double-digit import drop despite the government’s spending catch-up that was supposed to spur purchases of capital goods from abroad.

EXPORTS
September was marked by merchandise exports’ worst performance since their 6.7% drop in January.

Sales abroad of electronic products, which made up 61% of total merchandise exports in September, grew 3.8% year-on-year to $3.594 billion. Semiconductors, which made up 75.9% of electronics and 46.3% of total merchandise exports, grew 5.4% to $2.728 billion.




The PSA cited decreases in foreign sales of seven of the top 10 major export commodities, namely: metal components (-25.8%); articles of apparel and clothing accessories (-20.7%); machinery and transport equipment (-20%); miscellaneous manufactured articles (-8.1%), ignition wiring set and other wiring sets used in vehicles, aircraft and ships (-7%); “other manufactured goods” (-6.3%) and gold (-1.8%).

Merchandise exports saw a 0.1% dip year-to-date, even as sale of electronic products went up by 2.2% to $29.654 billion and — under that category — semiconductors edged up by one percent to $21.688 billion. That compared to the Semiconductor and Electronics Industries in the Philippines, Inc.’s 0-3% full-year 2019 goal.

IMPORTS WORRY
September also saw merchandise imports’ worst performance since their 13.3% drop in April 2012.

The PSA attributed September’s drop to declines in seven of the top 10 import commodities, namely: iron and steel (-46.8%); cereals and cereal preparations (-22%); mineral fuels, lubricants and related materials (-14.5%); plastics (-9.4%); transport equipment (-7.8%); electronic products (-7.1%) as well as industrial machinery and equipment (-1.2%).

Electronic products, which made up a fourth of total merchandise imports, dropped 7.1% to $2.284 billion in September.

Purchases of foreign raw materials and intermediate goods — which made up 35.4% of total merchandise imports — dropped 23.1% to $3.19 billion, while those of capital goods which made up 32.5% edged up by a nearly flat 0.3% to $2.93 billion.

J.P.Morgan said in an Asia Pacific Emerging Markets Research note that performance of capital goods (down five percent month-on-month and 15.1% quarter-on-quarter), which it described as “a proxy for the underlying fixed investment trend… runs against our forecast of for a capex and infrastructure recovery in late 3Q19, buoyed by a rebound in business sentiment last quarter.”

In a separate note, Nomura said in a Global Markets Research note that imports’ double-digit drop “was surprising to us given that fiscal data already show sharply rising infrastructure and other capital outlays.”

Imports dropped 3.4% year-to-date to $80.649 billion, even as electronic product purchases edged up 0.1% to $21.12 billion.

For UnionBank of the Philippines, Inc. Chief Economist, Ruben Carlo O. Asuncion, “third quarter trade performance… highly suggests that Philippine trade continues to be impacted by the protracted US-China trade conflict and import performance, particularly, has not picked up yet with the government’s supposed spending catch-up.”

“However, both export and import performances are expected to recover in the fourth quarter with positive news on trade discussions between the United States and China and the Duterte government’s spending catch-up efforts.”

Socioeconomic Planning Secretary Ernesto M. Pernia said in a news release of the

Sought for comment, Rizal Commercial Banking Corp.’s (RCBC) economics research division head Michael L. Ricafort also noted that “[t]he sharp increase in government spending in September 2019… may not be reflected yet in terms of increased imports of inputs/materials used for construction… as this may have a lag in positive effects in the coming months in terms of increased importation of construction materials such as steel, cement, and other inputs required by major infrastructure projects.”

National Economic and Development Authority, which he heads as director general, that “the government must sustain faster infrastructure spending in the fourth quarter to achieve the target disbursement performance for the year.”

“The push for high impact and implementable infrastructure projects under the ‘Build, Build, Build’ program is expected to improve transport and logistics, which are crucial in supporting the growth of exports.”

TOP TRADE PARTNERS
The nine months to September saw the United States as the top market for Philippine goods, accounting for 16.3% with $8.569 billion, 7.4% more than a year ago.

Japan followed with a 15.1% share of $7.91 billion, up 1.5% year-on-year.

Mainland China came next with 13.7% at $7.214 billion, up 6.8%, while Hong Kong was fourth with a 13.5% share of $7.07 billion, down 4.4% from a year ago.

China, however, was the biggest source of foreign goods purchased by locals year-to-date, accounting for 22.8% at $18.419 billion, 14.4% more than a year ago.

Japan was the next biggest source of imports, contributing 9.4% at $7.559 billion, down 6.9%.

South Korea was third with a 7.8% share of $6.313 billion, down 24.7%, while the United States contributed 7.2% with $5.796 billion, down 3.32%. — Jenina P. Ibañez

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