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3.3% fall in Jan exports a blip: economists

Sharper pull-back, on lacklustre electronics shipments, likely due to CNY factors

[SINGAPORE] After surging a surprise 6 per cent in December, Singapore's non-oil domestic exports (NODX) declined 3.3 per cent year-on-year in January, due to lacklustre electronics shipments.

But economists aren't too fazed by the larger-than-expected contraction, since some of the weakness was likely due to Chinese New Year seasonal factors. They believe exports could pick up in the coming months to put on a better showing this year, compared to the bleak performance last year.

The pull-back in January's NODX, while expected, came in sharper than thought. The median forecast by a Bloomberg poll of 16 economists, before International Enterprise (IE) Singapore released the data yesterday morning, was for a 1.2 per cent decline.

The main drag was a 17 per cent contraction in electronics NODX in January, after a 3.1 per cent decline in the previous month. This, too, was well below the market's consensus forecast for a 4.3 per cent decline in electronics NODX.

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The weak performance in PC-related product groups - such as disk drives (-31.5 per cent) and PC parts (-19.4 per cent) - outweighed the 3.5 per cent rise in non-electronics NODX, which followed a 10.6 per cent increase in December.

Several economists said that January's feeble showing was likely skewed by the new year lull, which resulted in fewer working days and therefore suppressed export performance.

"We expect some of this weakness was due to Chinese New Year," said ANZ economist Daniel Wilson, who highlighted the fact that the top three contributors to the NODX contraction in January were Hong Kong (-21 per cent), Korea (-34.7 per cent), and Taiwan (-7.1 per cent).

DBS economist Irvin Seah added that "it pays to note that (January's) decline has more to do with short-term seasonal factors, rather than underlying fundamentals".

Month-on-month, the NODX reversed a seasonally-adjusted 6.3 per cent expansion in December to post a 5 per cent decrease in January, due to declines in both electronic and non-electronic NODX. Private sector economists had been expecting a contraction of 0.8 per cent.

Non-oil re-exports (NORX), however, continued to rise last month, but the pace moderated to a year-on-year increase of 9 per cent, after growth of 14.2 per cent in December. Both electronic and non-electronic NORX rose in January.

Citi economists Kit Wei Zheng and Brian Tan pointed out that there remains some divergence between stronger NORX (which represents regional trade trends), and lacklustre NODX (which represents demand for domestic manufacturing).

"This could suggest that Singapore's manufacturing demand continues to underperform the region," said Mr Kit and Mr Tan.

Although January's NODX got off to a weak start, economists are treating the sub-par performance as a mere "downside blip". This is due to expectations of a steady global recovery - particularly in the United States, the eurozone, and Japan - which will provide a boost to Singapore's export demand later this year.

Said UOB economist Francis Tan: "This can already be seen in the improving manufacturing PMI (purchasing managers' index) numbers where it showed that developed markets' purchasing managers were generally more optimistic compared to their emerging market counterparts. Coupled with a low NODX base in 2013, we think that 2014 NODX will come in stronger."

UOB's 2014 NODX growth forecast stands at 7 per cent - significantly higher than IE Singapore's projection of 1-3 per cent.

Except for China, the European Union, the US, and Indonesia, NODX to all of Singapore's top 10 markets fell last month.

With final Q4 2013 GDP figures due for release this Thursday, economists polled by Bloomberg expect the government's flash estimate of 4.4 per cent growth to be revised upwards, to 4.9 per cent year-on-year.

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