Production improvement from exports- June indicators confirmed modest recovery in production. Manufacturing production rose 3%MoM, another positive growth for the past five months. On a yearly basis the index fell 7.8% vs 10% fall in May. Production improvement confined to hard disk drives, canned seafood and electrical appliances from pick up in exports. Auto production improved from 50% YoY fall since 4Q08 to 29% contraction in June. Farm output fell 6.3% after a10% fall in May. Tourist arrivals fell 18.6%YoY. Private consumption fell 2.7%YoY vs 4.7% fall in May. The index rose 2.6%MoM from higher auto sales, VAT and consumer goods imports. Private investment index fell 15.5% YoY but was up 1.1% MoM. The increase was from MoM rise in cement sales (+2.6%MoM) and capital goods imports (+1.4%MoM).
Although manufacturing production showed a strong pick up (+10%QoQSA), the pick up is confined to selected exports and not broad-based. Overall, domestic demand remains weak. Private investment showed no growth in 2Q while private consumption grew only 1.1%QoQ. Fiscal policy did not support the economy in 1H because disbursement was moderate. Falling agricultural prices, A(H1N1) and politics also dampened agriculture and tourism sectors. We do not expect material recovery in private spending. Therefore, 2H09 growth will depend primarily on export recovery and govt spending.