Exports jumped to a surprising 4.5 per cent growth in July after enduring five months of contraction.
The growth was driven by higher demand for the electrical and electronic (E&E) products.
The latest numbers beat market expectations which projected both exports and imports to continue to contract, albeit moderately, as global demand for E&E remained weak and commodity prices stayed weak.
The International Trade and Industry Ministry, in releasing the details, said it was the highest monthly exports recorded for the first seven months of the year.
"The expansion in exports was contributed mainly by higher exports of liquefied natural gas (LNG) (up by RM2.12 billion) as well as E&E products, primarily electronic integrated circuits (up by RM1.19 billion)."
The increase in external demand was mainly from China, Taiwan, Indonesia, Japan and Thailand.
It said imports rose by 6.2 per cent to RM57.87 billion, on the back of imports of intermediate goods which increased by 1.6 per cent, capital goods (up by 8.3 per cent) and consumption goods (up by 10.6 per cent).
CIMB Investment Bank chief economist Lee Heng Guie is however, cautious on whether the growth rebound is sustainable.
Festive season distortions during the Hari Raya celebration may cause a pullback in August’s export growth.
"The shrinking monthly trade surplus of RM2.9 billion in July from RM4.3 billion in June marks a weak start for the current account balance in the third quarter."
Santitarn Sathirathai of Credit Suisse Singapore commented that Malaysia, unlike neighbouring Indonesia, has substantial industrial export base that allows it to benefit from the anticipated pick in the global trade cycle.
On the current account deterioration, Sathirathai said the lower trade balance will not sooth investors’ concerns over the external account and the ringgit.
"However, the silver lining here is that exports are showing signs of recovery and we think it has further to go.
"The issue is strong import growth, which should be partly addressed by the government’s plans to delay some of the infrastructure projects and the general slowdown in GDP growth."
He said although the current account will likely continue to deteriorate on a year-on-year basis over the next few quarters, the magnitude will become smaller.
Meanwhile, MITI said exports to Asean increased by 1.9 per cent, China (17.5 per cent), Japan (7.1 per cent) and the European Union (12.8 per cent).
Exports to the US was however, lower by 11.3 per cent owing to lower exports of optical and scientific equipment primarily parts and accessories for oscilloscope and spectrum analyser as well as iron and steel products, specifically tubes, pipes, hollow profiles and tubes or pipe fittings.
However, E&E products mainly motor vehicles radio with recorder as well as parts and accessories for computers rose by 3.3 per cent. The E&E products accounted for 60 per cent of total exports to the US.