Philippine export growth accelerated a bit in the midst of a less severe contraction in imports, resulting in a larger trade deficit in July. The softness in imports has been partially because of a high base last year, although intermediate goods imports have also been rather soft.
Export growth accelerated to 3.5 percent on a year-on-year basis in July, buoyed by a 4.2 percent year-on-year rise in manufactured exports. Growth in electronics exports eased to 2.9 percent in July, owing to slower growth in the exports of semiconductor and electronic data processing units.
Nevertheless, this was more than countered by a rebound in exports of transport equipment and a smaller contraction in chemical exports. PMI orders-to-inventory data implies some upside to manufactured exports, however the relationship has been less clear recently, noted ANZ in a research report.
Agriculture and forest exports saw faster growth in July. Mineral exports’ growth slowed a bit but continues to be strong at 12.2 percent year-on-year. The exports of copper and concentrates remain a key driver, with some evidence of diversion of Chinese demand to the Philippines after tariffs applied on the U.S.
Imports shrank for the fourth consecutive month, mainly due to high base last year, though there has been a contraction in intermediate goods imports in recent months. Imports of intermediate electric equipment continues to be subdued implying no immediate recovery in electronics export.
In the meantime, capital goods imports rose 3.4 percent year-on-year in July, consistent with a similar rise in government expenditure in the month. Consumer goods imports grew 7.6 percent in July on both higher durable and non-durable purchases, a positive early sign for consumption in the third quarter.
“Import growth is likely to recover over the next few months contingent on the expected pick up in government spending. So far, the pick-up in government spending remains modest and with slowing credit growth, particularly for manufacturing loans, the pace of increase in imports will likely be more moderate than in the past”, added ANZ.