Januarys trade mirage

Trade data released by the Federal Bureau of Statistics was not much of a surprise on a year-on-year analogy. However, on a month-on-month basis, January 2012 offered some respite in terms of a volumetric improvement in key export items. Most of the major categories in the textile group saw a net increase in exports during January FY12 versus December FY12. While average unit prices (AUP) of major textile exports such as cotton cloth, yarn, and readymade garments improved, AUP of other value-added categories such as knit wear and bed wear, which had started declining in December FY12, continued to show a month-on-month decrease in January this year. Volumetric analysis showed a month-on-month increase in major textile sub-groups, particularly that of yarn, besides knitwear, bedwear, though readymade garments, towels and cotton cloth continued to show a month-on-month decline in the quantity of exports. An All Pakistan Textile Manufacturers Association (APTMA) official claimed that the increase in quantities of exported yarn in January is attributable to a bumper cotton crop seen lately during this fiscal year. "The greater quantity and lower price of our yarn, consequently, rendered it more competitive in international markets and helped improve export volumes this month," he claimed. Shehzad Salim, Central Chairman of Pakistan Ready-made Garments Manufacturers Association (PRGMEA), explained the reason for the rise in exports of value-added textile products: "Some orders had been held back by international retailers during October-December this fiscal year because of recessionary pressures in the West. The exports of these products were restored in January, explaining the marginal month-on-month improvement." However, year-on-year comparisons reveal a continuation of the declining trend in exports. Even though prices of major textile categories improved in January FY12 versus January FY11, the year-on-year slump in export volumes in these categories during January FY12 was marked enough such that net exports of major categories and of the textile group in general decreased relative to January FY11. For 7MFY12, overall, the year-on-year decrease in export volumes pulled down net exports of the textile group by about 7 percent. Other key export items, such as rice, continued to show both a month-on-month and year-on-year decrease in quantity exported. Led by the volumetric decline; net exports of rice decreased year-on-year by nearly 9 percent during July-January FY12, despite a marginal improvement in average unit prices. As far as imports are concerned, in the major category of petroleum imports, the quantity of refined petroleum products imported decreased considerably by 15 percent in January FY12 versus the previous month. This could be plausibly attributed to circular-debt-induced liquidity constraints with PSO, the key petroleum importer in the country. However, on a year-on-year basis, imports of petroleum products increased in January FY12 versus January FY11, as well as during 7MFY12 versus the same period last year. But imported quantities of crude petroleum decreased on a year-on-year basis, showing increased reliance on refined petrol products rather than refining of crude petroleum by local refineries. Palm oil imports depicted a similar trend to refined petroleum products, showing a month-on-month decrease in quantity imported in January FY12, which brought down net palm oil imports in January vis-à-vis December this fiscal year. However, a year-on-year comparison showed an increase in the quantity and net palm oil imports during January FY12 and 7MFY12. Omar Islam Khan, Secretary General Pakistan Vegetable Oil and Ghee Manufacturers Association (PVMA) attributes this fall in imports of palm oil to strikes by the Pakistan Oil Tankers Association earlier in January, which created supply-side disruptions for vegetable oil. Consequently, stocks of accumulated vegetable oil slowed down further imports of the product. While January may have offered a breather in terms of marginally improved export volumes and lower petroleum imports, the phenomenon is largely temporary and the trend of declining export volumes and rising petroleum imports is expected to resume in the latter months of this fiscal year.

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Selected commodities: Jul-Jan FY12              Jan FY12
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                           Total       Y/Y %       M/M %
Exports                   (mn $)         chg         chg
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Rice                       1,094        -9.2       -16.9
Cotton yarn                  936       -21.9        16.0
Cotton cloth               1,335        0.27        -1.8
Knitwear                   1,194        -8.7         3.7
Bed wear                   1,055        -9.2       -0.57
Towels                       380        -6.7        10.3
RMG*                         946        0.94         5.0
Imports
Palm oil                   1,440        31.8       -19.2
Petroleum products         5,857        47.4       -21.7
Petroleum crude            2,902        18.2        12.5
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* readymade garments Source: PBS