Weak Sept exports put GDP forecast at risk

Singapore

AFTER a strong comeback in August, Singapore's non-oil domestic exports (NODX) failed to follow through in September.

And the slowdown was worse than expected, leading some economists to predict the government may now have to revise down the final GDP growth figure for the third quarter.

NODX inched up 0.9 per cent from a year ago last month, a far cry from the 6.0 per cent gain in August and the 2.9 per cent forecast by the market.

The comedown was even more disappointing month on month. The latest trade figures released on Friday by trade promotion agency International Enterprise Singapore showed that NODX in September tumbled a seasonally-adjusted 8.8 per cent from August, overturning the 7.6 per cent jump in the previous month.

OCBC Bank economist Selena Ling noted that the decline, which came when the market was looking at a 4.3 per cent dip, was the biggest month-on- month fall since March this year.

Daniel Wilson and Glenn Maguire at ANZ said the sequentially sharp fall does not bode well for Q3 GDP growth. "There are likely downside risks to the 2.4 per cent year-on-year advanced estimate (announced on Tuesday this week)," they wrote in a short report.

Citigroup's Kit Wei Zheng also thinks September's weak NODX "may hint at a small downward revision to Q3 GDP advance estimates". He added: "We'll look to September's industrial production data next week for further confirmation."

Said CIMB's Song Seng Wun: "Nothing changed with latest trade report. Singapore's non-oil export performance confirmed the view that global growth momentum lost some steam in Q314 with total non-oil exports dipping 1.0 per cent, the first year-on-year decline since Q113."

Though weak, NODX's year-on-year showing last month was still positive and wrapped up a quarter of growth in July-September - the first quarterly expansion in two years, Mr Song noted. Still, NODX was down 1.1 per cent for the year to date.

"(This) reinforces our forecast of full year 2014 NODX growth of around -1.0 to -2.0 per cent," said OCBC's Ms Ling. The official forecast stands at between -2.0 and -1.0 per cent.

Chua Hak Bin at Bank of America Merrill Lynch saw the Q3 expansion as a sign pointing to a gradual recovery. Yet, he noted that Singapore's NODX performance has lagged behind the export growth of Asian competitors like Malaysia, South Korea and Taiwan.

"Restructuring efforts and a weak global PC market explain the bulk of the lag," Mr Chua said. "Stronger US growth will help boost exports, but we think restructuring and stricter foreign worker policies will limit the lift."

IE Singapore attributed the NODX's (year-on-year) growth last month to "an increase in non-electronics NODX which outweighed the decline in electronics NODX".

Non-electronics NODX expanded 3 per cent in September, though this was down from the month before when it grew 12.1 per cent. Electronics NODX dipped 4 per cent, after a 6.9 per cent tumble in August.

"Support (for non-electronics NODX) came from segments such as petrochemicals (+16.5 per cent), specialised machinery (+32.9 per cent) and primary chemicals (+24.1 per cent)," said economists Francis Tan and Jimmy Koh at UOB Bank in a report.

Electronics NODX's decline last month, for the 26th straight month, was again led mainly by PC-related shipments like parts of PCs and disk drives.

Non-oil re-exports (NORX) turned around in September, rising 4.2 per cent year-on-year after a 5.6 per cent drop in August.

Except for Hong Kong, Japan, the EU and Indonesia, NODX shipments to all of Singapore's top 10 markets increased in September. The top three contributors to the NODX rise last month were China, Taiwan and Malaysia.