Whisk flour, baking powder, baking soda, salt, and nutmeg together in a bowl.
Cream butter and sugar in stand mixer until pale and fluffy, about 2 minutes.
Add egg and milk, beat until combined.
On low speed, add flour mixture and coconut, mix until just combined.
Form dough into 15-inch log, flatten to 3x1 inches. Wrap and chill at least 45 minutes.
Preheat oven to 350°F. Line baking sheets with parchment paper.
Slice dough into ¼-inch rectangles, space on sheets. Press ridges with floured fork.
Bake 15-18 minutes, rotating sheets halfway, until toasty brown. Cool 10 minutes on sheet, then transfer to rack.
