AFTER a blip in September, exports are expected to continue to contract in October due to the sluggish global demand.
Economists said the Purchasing Managers Index, an indication of the momentum in manufacturing activities, has shown some stabilisation recently.
A Business Times poll expects exports to contract by an average 4.3 per cent from September's 2.6 per cent, while imports are expected to grow by an average 10.06 per cent and the trade balance to average RM7.46 billion.
The International Trade and Industry Ministry will release the data today.
Citi said import data from China (-17.9 per cent), Japan (-11.7 per cent) and Singapore (2.4 per cent), Malaysia's main trading partners, have hinted that exports are more likely to fall in October.
However, China's exports to Malaysia surged higher while Japanese exports eased and Singapore's exports have also risen into expansionary territory.
DBS Bank economist Irvin Seah said a poor outcome is on the cards as headline export growth is expected to dip into negative territory again after a blip in the previous month.
"Weak global demand continues to weigh down export performance as the PMIs of key markets have continued to languish."
Seah said although there have been marginal improvements in the PMIs for China and the US, whether that will eventually materialise into a firmer recovery in demand remains to be seen.
Signs of an improvement in demand due to the year-end festive season are practically non-existent.
"So, don't pin too high hopes on a turnaround at least for the next two to three months."
Gundy Cahyadi of OCBC Bank said the strong domestic demand would continue to prop up demand for imports, boosted mainly by the consumption of good and capital goods components.
"The weak external demand picture could continue to keep export recovery in check, especially if we note that signs from the US semiconductor book-to-bill ratio remain rather dire."
He expects exports to grow close to the neutral territory, with the improved PMI numbers and slight rebound in crude palm oil prices.
Seah said effects of the Economic Transformation Programme as well as a buoyant labour market should ensure that import growth remains strong.