Dec NODX up a surprise 9.4%, but full-year estimate remains in the red

Singapore

SINGAPORE'S non-oil domestic exports (NODX) continued to surprise with a 9.4 per cent year-on-year jump in December 2016, but it was insufficient to haul full-year growth into positive territory.

The latest trade data by International Enterprise (IE) Singapore showed December's NODX growth beat market consensus of 5.8 per cent, with both electronics and non-electronics exports expanding.

But despite a strong showing of 11.5 per cent year-on-year growth in November, private sector economists estimate that full-year NODX growth to be negative, ranging from -2.4 per cent to -3.2 per cent year on year, marking the fourth full-year decline.

IE Singapore had in November downgraded the full-year forecast for NODX, predicting that it will drop 5-5.5 per cent in 2016, against the earlier projection of a 3-4 per cent fall. It will release the full-year NODX growth figure in February.

OCBC Bank economist Selena Ling said that the latest data suggests that NODX bottomed in the second half of 2016.

Describing Singapore as the canary in the coal mine, ANZ Research economist Ng Weiwen said that the positive trade data corroborates export rebound in most Asian countries - signalling a tentative end of the trade recession which has plagued the region since late 2014.

Electronics domestic exports grew 5.7 per cent year on year in December, following a 3.5 per cent rise year on year in November, with integrated circuits (29.9 per cent), personal computer parts (4.9 per cent) and consumer electronics (8.8 per cent) being the biggest contributors.

Non-electronics exports grew 11.3 per cent compared to December 2015, led by specialised machinery (63.6 per cent), petrochemicals (28.5 per cent) and primary chemicals (58.2 per cent). This follows 15.3 per cent growth year on year in the previous month.

Citibank economist Kit Wei Zheng said: "Today's data confirms that Singapore's economy rode on the global manufacturing upcycle in 4Q, which lifted tech exports and other trade-related services in transport and storage, and wholesale trade."

Similarly, JP Morgan economist Benjamin Shatil said that the recent data points to "a convincing acceleration in external demand through late last year, with the tech cycle in particular appearing stronger and more durable than recent past cycles".

Ms Ling expects global demand for OLED displays, dual-lens cameras, fingerprint technology and touch screens to remain key industry drivers in 2017 and sustain manufacturing momentum for H117.

NODX to the majority of the top 10 markets rose in December 2016, with China (33.5 per cent), Taiwan (54.8 per cent) and Hong Kong (20.6 per cent) as the largest contributors.

But, NODX to the US, Japan, the EU 28 and Malaysia fell.

Ms Ling said China's lead suggests that Chinese demand was benefiting from the coordinated policy accommodation, with International Monetary Fund sounding a tad more upbeat on global economic prospects.

Month on month, NODX grew a seasonally adjusted one per cent, compared with last month's 13 per cent growth, as a rise in electronics NODX outweighed the decrease in non-electronics NODX. The level of NODX reached a seasonally adjusted S$14 billion in December 2016, higher than the S$13.9 billion in the previous month.

However, economists remain cautiously optimistic over the sustainability of the export pick-up as geopolitical tensions and protectionism looms. Mr Ng said: "We think the risk of US-Sino trade tensions has increased. Any loss of momentum in China's trade will have repercussions across the rest of Asia. Furthermore, if President Trump does manage to undertake a sharply protectionist trade policy stance, levy extra taxes on US importers and label major trade partners as currency manipulators, this may well attract retaliatory measures from trading partners and exacerbate trade tensions."

These would then negatively affect Singapore, which is still wedded to the old export model, and the most leveraged Asean economy to the global trade cycle, Mr Ng added.

Mr Kit said: "Even if exports and GDP outperform our forecasts, domestically oriented and interest rate sensitive sectors may underperform in 2017 on headwinds from elevated debt levels and rising interest rates, amid continued job market slack - a classic dual economy scenario."

UOB and Nomura both maintained their 2017 NODX growth forecast of 0.7 per cent year on year, while OCBC tip 0-2 per cent growth.