Updated quick takes: Singapore's NODX prospects stay tepid in first-half of 2016

SINGAPORE'S non-oil domestic exports (NODX) started the year with a worse-than-expected 9.9 per cent year-on-year (yoy) plunge, marking its third straight month of contraction as shipments to all top 10 markets, except the European Union (EU) 28 and Malaysia, declined.

January NODX came in at S$12.3 billion. The fall was attributed to a contraction in both electronics and non-electronics NODX.

Economists polled by Reuters were expecting January NODX to fall an average of 7.4 per cent from a year earlier.

International Enterprise Singapore also unveiled on Wednesday that total trade contracted by 14.4 per cent in January to S$64.7 billion, following the 8.4 per cent decline in the previous month.

Here are some analysts' comments:

Irvin Seah, senior economist, DBS:

"This is the first official set of economic numbers for the year and it certainly spells bad news on this small and open economy. Plainly, global outlook has worsened. A tepid growth momentum in the US and the sharp deceleration in China are weighing down on growth prospects.

"The PMIs of most key markets have remained stuck in the contraction territory while the US SEMI (Semiconductor Equipment and Materials International) book-to-bill ratio is reflecting a down-cycle in the electronics industry. Global demand has weakened amid a challenging external environment.

"Today's NODX will add on to the growing list of dire economic data. If such trend persists, recession will become a real threat."

Francis Tan, economist, UOB:

"Although January NODX remained weak, we are optimistic on NODX for February, largely due to the low base effects (NODX contracted 11.7 per cent yoy in Feb 2015)."

"However, this is no cause for cheers and certainly does not signal a turnaround in NODX yet. In fact, H1 2016 NODX performance is likely to remain weak (we are expecting NODX to contract 1.1 per cent yoy in H1). Our forecast for Q1 GDP growth remains at a weak 1.9 per cent yoy (it was 2.7 per cent yoy in Q1 2015), due in part to the continued contraction in the manufacturing sector as global demand wanes.

"The key question now is whether there could be some form of monetary stimulus from the central bank.

"We maintain our 2016 NODX growth forecast at 2.1 per cent, where most of the improvement in NODX takes effect in H2 2016. However, there could be downside risks to our forecast should the uncertainties in China's growth and oil prices perpetuate."

Weiwen Ng, economist, Asean and Pacific, ANZ Research:

"Singapore exports remain in a funk. Singapore non-oil domestic exports remain in search of footing, showing no signs of nascent revival as we turn into the new year, registering a sharper than expected contraction of close to 10 per cent yoy in Jan."

". . . Singapore must leverage on the rising tide of services trade. Any positive impetus from the merchandise trade channel will be marginal given the secular shift towards services in both the US and China which translates to lower merchandise imports from traditional partners. The reconfiguration of the regional supply chain - with China embracing vertical integration - would be negative for merchandise trade.

"This ongoing trade recession has had already a knock on impact on externally-oriented sectors and we are pencilling significant downward revision in the final estimate of Q4 GDP due later February."

Selena Ling, head of treasury research & strategy, OCBC:

"This is worse than the 7.2 per cent yoy contraction (-0.3 per cent month-on-month seasonally adjusted) reading in Dec and the -7.5 per cent yoy (+3.5 per cent mom sa) we anticipated, albeit the Jan 2015 base was relatively high at +4.3 per cent yoy.

"Broad-based weakness was clear across our key markets - only 2 of the top 10 NODX markets rose in Jan, namely EU28 (+14.3 per cent yoy) and Malaysia (+2.8 per cent), whilst the biggest drags came from the Greater China markets with China (-25.2 per cent), Taiwan (-26.5 per cent), and Hong Kong (-9.6 per cent), as well as Indonesia (-11.4 per cent).

"Looking ahead, S'pore's NODX prospects remain tepid in 1H16. We tip 2016 NODX growth at a marginal 0-1 per cent yoy, versus the -0.1 per cent yoy seen in 2015."