Philippine May exports overshoot to 19.7%

The actual export numbers were roughly three times more than the 6.5% growth predicted by the market.

Manufacturing led the surprise gain with an impressive 29% yoy jump, but sustainability issues continue to undermine the country's latest economic bounce.

Here's more from RBS:

May exports increased a solid 19.7% yoy beating expectations of 6.5% growth by a wide margin. Exports had grown by 7.6% yoy in April by comparison. This increase came on the back of higher manufacturing exports, which increased 29% yoy. The increase in exports bolsters forecasts for both the growth and the current account for Q2 2012. However we believe that this growth is driven largely by one-off export orders rather than any sustained increase in demand for Philippines' products.

Lately it appears nothing can go wrong in the Philippines' economy and today's number further bolsters this view. However a closer look is warranted to ascertain their sustainability and fix our expectations for the future.

The increase in May exports was largely because of higher manufacturing exports, specifically exports of machinery and transport equipment and of miscellaneous articles. The increase in export of miscellaneous articles is interesting as it is an eleven- fold increase in yoy terms. This presents two possibilities: (1) Philippines has found new markets for its exports and thereby, the sensitivity to developments in the EU have diminished; or (2) this was a one-time increase and is not an indicator of future trends. We believe in the second possibility as this increase was coupled with another one-off increase in exports to Thailand and to Japan. Exports destined for Thailand were up three fold while those to Japan increased by 80% yoy. We had observed a similar phenomenon in the April data for exports to Korea. That number is now back at its normal level in May.

The increase in manufacturing exports was countered by a drop in exports of petroleum products of 82% yoy. This large drop is however not a surprising outcome considering that the global demand for petroleum products has been slowing down, especially in the US. Therefore, we do not expect this number to show a bounce-back in the June numbers either.

We are not updating our export forecasts for the rest of the year at this time. However our overall growth expectations for Q2 2012 do get a boost as the data suggests a lower trade deficit and consequently, a higher contribution from net exports.