Still no silver lining in sight for non-oil domestic exports

Singapore

SINGAPORE'S non-oil domestic exports (NODX) continued to tumble in April from a year ago, though the underlying growth momentum may be picking up, the latest trade numbers show. Yet, despite the fact that the drop was only half as much as it was in March, private-sector economists don't see the figure hitting the bottom till end-June.

Last month's NODX fell 7.9 per cent year-on-year - not as bad as the 8.4 per cent decline economists were looking at, or March's 15.7 per cent plunge. Month-on-month, the NODX rose a seasonally adjusted 4.5 per cent to extend the 0.1 per cent increase a month earlier, according to trade data released on Tuesday by trade promotion agency International Enterprise (IE) Singapore.

While the sequential increase may provide a silver lining, DBS Bank's Irving Seah said the increase could just be a technical payback from two straight months (February and March) of exceptionally low export values.

"The biggest concern is that non-oil retained imports of intermediate goods (NORI) have continued to fall," he said. "This is the second consecutive month of decline . . . Lower NORI essentially makes for lower export values later on."

Indicating that there is still no cause for cheer despite the better- than-expected NODX showing in April, Citigroup's Kit Wei Zheng noted that the improvement was led narrowly by volatile pharmaceutical exports; thus, sustainability remains in question.

"Electronics and petrochemicals remain weak, and the plunge in NORI levels may suggest that manufacturers are not particularly optimistic about the outlook for final demand and may be reluctant to stock up on components," Mr Kit said.

After sinking 30.9 per cent in March, pharmaceutical shipments bounced back with a 17.9 per cent jump last month. But the overall non-electronic NODX still slipped 8.1 per cent in April, following an 18 per cent fall in the previous month.

Electronic NODX fell 7.4 per cent, against a 9.1 per cent drop in March. NORI declined from S$1.4 billion in March to hit S$3.5 billion in April.

"We're not out of the woods yet as far as export performance is concerned," said DBS Bank's Mr Seah. "Manufacturers and exporters are still struggling with weak demand, and this will eventually manifest itself in the headline GDP growth figures."

OCBC Bank's Selena Ling, tipping the trade outlook to stay "lacklustre", said the NODX slump could lead to a seasonally-adjusted one per cent quarter-on-quarter dip in the second- quarter GDP.

UOB Bank's Alvin Liew predicted: "Singapore's NODX will remain weak in the next few months, and while we are expecting a 3.3 per cent year-on- year contraction in the first half, the decline may be deeper than that, judging by the protracted weakness seen in March-April NODX declines."

April's NODX shrinkage was broad-based, with declines in both electronic and non-electronic exports. The contractions reflected still- weak external demand. Except for the EU and Hong Kong, NODX shipments to all of Singapore's top 10 markets fell.

IE Singapore said Taiwan, South Korea and Indonesia were the biggest contributors to the NODX decline last month. Exports to South Korea plunged 26.7 per cent, after a 9.8 per cent drop in March.

Shipments to Taiwan, which fell 13.8 per cent in the previous month, dropped 22.5 per cent in April. Exports to Indonesia fell 20.4 per cent - not much different from the 20.2 per cent drop in the previous month.

Non-oil re-exports dipped 2.8 per cent last month, after slipping 3 per cent in March.