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Exports extend fall in October

NODX down 12% against market's forecast of 3%; poor showing by both electronics and non-electronics segments
Friday, November 18, 2016 - 05:50

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Non-oil domestic exports (NODX) extended their fall as they entered the final quarter of the year, posting a bigger-than-expected 12 per cent year-on-year drop.

Singapore

NON-OIL domestic exports (NODX) extended their fall as they entered the final quarter of the year, posting a bigger-than-expected 12 per cent year-on-year drop.

The plunge in October follows a revised estimate of 5 per cent fall (from an earlier estimate of minus 4.8 per cent) in September.

The market had predicted a 3 per cent dip.

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Last month's drop was the seventh in 10 months this year.

Month on month, the NODX slipped by a seasonally adjusted 3.7 per cent in October, reversing the 2.2 per cent rise in September, going by trade data released on Thursday by International Enterprise Singapore.

Irvin Seah, an economist at DBS Bank, said: "The month-on-month decline underscores the existing challenging economic conditions, even after discounting the festive season effect."

Except for Taiwan, Hong Kong and South Korea, domestic shipments to the top 10 markets were down.

Shipments to the European Union were down 28.6 per cent year on year, to Japan, -19.9 per cent and to Indonesia, -13.1 per cent. They were the biggest contributors to the NODX's dive in October, said IE Singapore's trade figures.

Ng Weiwen of ANZ Bank said: "Exports are clearly not out of the woods for Singapore."

UOB Bank economist Ho Woei Chen said October's weak NODX has led the bank to revise its NODX growth figure for the full year to minus 4.1 per cent, from minus 2.5 per cent previously.

IE Singapore has tipped the NODX to drop 3 to 4 per cent for the year.

In the first half of the year, the NODX slumped 4.5 per cent, suggesting that the descent from thereon would be gentler. But that hasn't happened.

The trade promotion agency blamed NODX's dismal showing last month on the electronic and non-electronic NODX.

The electronic NODX tumbled 6 per cent, easing a bit from the 6.6 decrease in September.

The non-electronic NODX, which sank 4.2 per cent that month, fell by a sharper 14.6 per cent in October.

Private-sector economists singled out the effects of a high base and the plunge in volatile pharmaceutical exports as the main factors that dragged down the NODX last month.

Pharmaceutical shipments dived 47 per cent after a 16.2 per cent gain in September.

While the big fall in pharmaceutical exports might be dismissed as a one-off factor, ANZ's Mr Ng warned that if it persists, NODX's disappointing performance will raise the odds of a technical recession for trade-dependent Singapore.

Citigroup's Kit Wei Zheng was surer in his assessment: October's trade data "affirms MAS's view for trade-related sectors to continue posing a drag on GDP growth in the quarters ahead, amid rising global uncertainty and sluggish external demand".

DBS's Mr Seah said the near-term outlook for exports is "likely to remain tepid as the global business cycle continues to search for a bottom".

Non-oil re-exports, an indicator of of regional and global trading sentiments, were not encouraging. They fell 8.9 per cent in October, after rising 1.2 per cent in the month before, IE Singapore's figures reveal.

Looking to 2017, ANZ's Mr Ng is worried that Trump-style protectionism - if it materialises - "will significantly disrupt globalisation and weigh negatively on the Singapore trade nexus, which is already confronted with structural overhang from reduced import intensity in the US and China ..."

"Post Brexit and ahead of European elections next year, free trade has scarce political support," he added.

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