Economists optimistic about Singapore's non-oil export outlook after 12.7% growth in July

SINGAPORE'S non-oil domestic exports (NODX) growth stayed robust in July at 12.7 per cent, Enterprise Singapore (ESG) data showed on Tuesday, with economists remaining optimistic about the export outlook for the rest of the year.

Marking the eighth month of year-on-year expansion, the July figure exceeded economists' expectations of 12 per cent in a Bloomberg poll, but was down from June's 15.9 per cent pace.

Barclays economist Brian Tan noted that the moderation from June was due in part to a small unfavourable base effect. UOB economist Barnabas Gan similarly framed July's figure as coming "against a relatively strong performance over the same period in 2020, underlining the continued recovery of global trade flows".

On a seasonally-adjusted monthly basis, NODX declined 0.9 per cent in July, compared to June's 6 per cent increase, with a sequential rise in non-electronic NODX but a decline in electronic NODX. The seasonally-adjusted NODX level was S$16.1 billion, down from S$16.3 billion in June.

Despite the sequential decline, economists still considered July's performance as holding up well, with Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye characterising NODX as having "remained resilient in July, despite supply chain disruptions due to regional lockdowns and China's slowing growth".

They maintained their full-year NODX forecast at 9 per cent, expecting exports in the second half of the year to be supported by resilient demand for semiconductor chips and related equipment, while non-electronics exports such as petrochemicals will continue to rise from the low base in 2020.

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But they also noted downside risks with the Covid-19 Delta variant forcing lockdowns in parts of Asia, floods in China and Germany, and partial shutdowns in factories across Asean. "Freight capacity remains tight in the world's major ports, and container rates continue to climb to record highs," they added.

Mr Gan expects Singapore's external-facing industries to benefit from the continued recovery of global trade demand, "while higher commodity prices may provide the fillip to overall export value ahead". His forecast for full-year NODX growth is 8 per cent.

This is at the top end of ESG's forecast range of 7-8 per cent, which was upgraded last week from a previous 1-3 per cent range. NODX grew 10.1 per cent in the second quarter, accelerating from 9.7 per cent in the first quarter.

OCBC head of treasury research and strategy Selena Ling's forecast is also 8 per cent, but she noted upside risks to this "given the continued strong streak of NODX growth into July which could sustain for the remainder of the year, especially given the still low base around October-November 2020".

July's NODX growth was mainly due to non-electronics exports, though electronics exports rose too.

Non-electronics NODX grew 12.1 per cent, slowing slightly from 13.2 per cent in June. Contributing the most to this were specialised machinery, pharmaceuticals and petrochemicals, with growth rates of 56.8 per cent, 48.3 per cent, and 49.4 per cent respectively.

Mr Tan highlighted that the sequential expansion in NODX "continued to be largely due to stronger shipments of specialised machinery for the manufacture of electronics and semiconductors, especially to China and Taiwan - likely reflecting manufacturers' efforts to alleviate shortages in the semiconductor space".

Electronics exports were up 15 per cent year on year, slowing from June's 25.5 per cent expansion. Exports of personal computers, integrated circuits, and diodes and transistors contributed most to this.

NODX to Singapore's top 10 markets rose as a whole in July, though NODX to the United States declined. Citing this as "another encouraging piece of data", Mr Gan noted that the last time Singapore had positive NODX growth for nine out of 10 top export destinations was in August 2017.

The largest contributors to the rise in NODX were China, with a 58.5 per cent rise; the European Union, up 61.5 per cent; and Taiwan, up 37 per cent.

NODX to emerging markets rose by 59.9 per cent in July 2021, following the 68.2 per cent expansion in June, due mainly to South Asia (+94.6 per cent), CLMV or Cambodia, Laos, Myanmar and Vietnam (+71.4 per cent), and Latin America (+92.2 per cent).

Total trade was up 19 per cent year on year, extending the 25 per cent growth in June, with exports up 16.4 per cent and imports up 22 per cent.

But on a seasonally-adjusted monthly basis, total trade declined 1.2 per cent in July, deepening from June's 0.4 per cent decrease. On a seasonally-adjusted basis, the level of total trade was S$93.6 billion, down from S$94.7 billion in June.

At the regional level, Ms Ling saw Singapore's strong July export performance as similar to that of South Korea, Taiwan, and China - though market watchers are slightly concerned that China's growth momentum may have peaked, she added.

JP Morgan analyst Ong Sin Beng sees the underlying momentum in regional goods exports as having slowed over the course of the second quarter, adding that July's "new export orders" component of Purchasing Managers' Index readings "has yet to signal a resumption of the prior strength". "The Taiwan July export orders data, a useful bellwether of global demand, will thus be especially useful in determining the goods trajectory in H2 2021," he added.