Higher Q3 GDP growth seen with electronics 'recovery underway'

Singapore

SINGAPORE'S exports dropped by an unexpected double digit in October, but a bottoming electronics sector has prompted private-sector economists to adjust upward their growth forecasts for gross domestic product (GDP) in the third quarter.

Maybank Kim Eng economists are looking at a final GDP growth figure for July-September of 0.8 per cent year-on-year - higher than the government's initial estimate of 0.1 per cent - even as Enterprise Singapore (ESG) reported on Monday that "high base" effect in non-electronics exports knocked the NODX down 12.3 per cent year-on-year last month, steeper than the 10.0 per cent polled by Bloomberg.

Indicating the better showing of electronics shipments in October, rising to a 9-month high, Maybank KE's Chua Hak Bin and Lee Ju Ye said in a brief report: "We think the electronics downcycle is past its worst and a recovery, albeit sluggish, is underway. This will be led by improving smartphone" numbers, which saw global sales recover in the third quarter."

According to ESG's latest official trade figures, electronics NODX dropped 16.4 per cent in October - the "softest pace" since February, Maybank KE's report notes - easing from a 24.8 per cent decline in September. Month on month, October electronics exports were up, the trade promotion agency said.

The Ministry of Trade and Industry is due to release the final third-quarter GDP growth figure on Thursday.

OCBC Bank's Selena Ling expects the figure to be revised up to 0.5 per cent - though she attributes the revision to a better-than-expected September industrial production.

UOB Bank's Barnabas Gan noted that the moderation in the decline of the electronics NODX "is in line with the surprise rebound in the industrial production" in September.

The Maybank KE report adds: "Manufacturing and exports will recover at a gradual pace, as the tariff shock dissipates. A partial US-China trade deal would help reduce uncertainty and spark some modest recovery in capital expenditures and trade in 2020".

Maybank KE projects the economy to grow 0.9 per cent this year and 1.6 per cent in 2020.

Barclays' Brian Tan, who was close to the mark in predicting October's NODX to fall 13 per cent, said: "NODX levels still appear to be bottoming out despite the sequential decline in October, which should help to put the brakes on the future year-on-year declines."

Barclays sees Singapore's GDP rising 0.6 per cent in 2019 and 0.7 per cent in 2020.

The latest NODX slide is its eighth straight monthly drop. A high base a year ago in non-electronics exports, especially pharmaceuticals, put the decline back in double-digit territory after the NODX fell 8.1 per cent in September, reversing three consecutive months of moderating retreat.

For October, non-electronics NODX sank 11 per cent, a sharper decline from the 2.3 per cent dip in September, dragged down by a high base. Pharmaceutical shipments plunged 36 per cent, while petrochemicals went down 19.2 per cent and primary chemicals tumbled 47.3 per cent.

Month on month, the drop in the NODX moderated from a seasonally adusted 3.3 per cent decrease in September to 2.9 per cent last month. Non-oil re-export also declined less steeply at 2.3 per cent year-on-year.

Except for Taiwan, NODX exports to all top 10 markets headed south in October, with Japan (-39.5 per cent), the European Union (-13.2 per cent) and the US (-10.5 per cent) the biggest contributors to last month's fall.