June exports rebound, but caution remains

Singapore

TWO consecutive days of stronger-than-expected data have helped to lift some of the deep pessimism seen earlier on Tuesday - when miserable second quarter GDP growth estimates pointed to a quarter-on-quarter contraction - illustrating again the choppiness that now characterises economic forecasting for Singapore.

Singapore's non-oil domestic exports (NODX) beat even the most sanguine of forecasts in June, staging a 4.7 per cent year-on-year rebound from May's 0.3 per cent decline, data from IE Singapore showed on Thursday.

This comes a day after the Department of Statistics said that a 46.6 per cent jump in motor vehicle sales boosted Singapore's retail sales in May, which rose 6.1 per cent year-on-year.

With the two latest data releases, private-sector economists now say a small upward revision in Q2 GDP is possible - although this can only be confirmed when June's industrial production performance is released on July 24.

Said HSBC economist Joseph Incalcaterra: "June's better-than-expected export reading suggests an upward revision to the Q2 GDP print (of a 4.6 per cent contraction on a seasonally adjusted, quarter-on-quarter annualised basis), but we must await June industrial production for final confirmation ... This doesn't only apply to manufacturing. Better-than-expected retail sale data from May and expectations of a further retail pick-up alongside the Great Singapore Sale - in part thanks to higher tourist spending - suggest the services sector saw a pickup in momentum in the end of Q2."

With broad-based improvements in almost every sector - and in particular the 7.6 per cent growth in electronic products - NODX's 4.7 per cent increase in June came above the market's expectation for a 2 per cent rise.

The increase in electronic domestic exports was largely due to personal computers (+69.6 per cent), integrated circuits (+10.8 per cent), and telecommunications equipment (+79.3 per cent). Barclays economist Leong Wai Ho estimates that the electronics rebound added 2.1 percentage points to overall year-on-year growth.

Non-electronic NODX, meanwhile, expanded by 3.6 per cent in June, following the 0.6 per cent increase in May. Growth was led by electrical machinery (+75 per cent), printed matter (+35.8 per cent), and non-electric engines & motors (+281.8 per cent).

Despite June's perkier-than forecast NODX performance, economists like Citi's Kit Wei Zheng see "no reason to cheer", as Q2 NODX levels remain below those of Q1.

Indeed, on a month-on-month seasonally adjusted basis, IE Singapore said NODX declined by 2.4 per cent in June following May's 3.3 per cent contraction. This was due to the decrease in non-electronic NODX, which outweighed the increase in electronic NODX.

Noted DBS economist Irvin Seah: "Despite the encouraging year-on-year figure, the (2.4 per cent) sequential decline is a concern. Note this follows a 3.3 per cent slide in the previous month. That is, the low base has helped in lifting the year-on-year figure but in effect, export sales are still slipping."

Bank of America Merrill Lynch's Chua Hak Bin - who has cut his full-year GDP growth forecast to 2 per cent from 2.5 per cent - also thinks the electronics recovery remains tenuous. "The US semiconductor book to bill ratio has fallen slightly to 0.99 in May, from 1.04 in April and 1.1 in March. Electronics exports also recently disappointed in Taiwan," said Dr Chua.

Given the uncertain export outlook, UOB economist Ho Woei Chen has maintained his 2015 NODX forecast of a one per cent contraction.

NODX to three of Singapore's top 10 markets - Indonesia, Taiwan, and Malaysia - contracted, while the largest gains were registered by the US (32.2 per cent) and Thailand (23.6 per cent).

Non-oil re-exports (NORX) rose 1.9 per cent year-on-year in June compared to May's 2.8 per cent contraction, due to an expansion in both electronic (+0.3 per cent) and non-electronic NORX (+3.6 per cent).