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July export growth comes up short; leading to mixed forecasts

8.5% rise lower than expected 9.1%; some economists believe expansion has peaked, others believe it'll power on

Growth in non-oil domestic exports (NODX) in July was slower than expected, and also lower than June's growth - but still looks strong with 8.5 per cent year-on-year growth.


GROWTH in non-oil domestic exports (NODX) in July was slower than expected, and also lower than June's growth - but still looks strong with 8.5 per cent year-on-year growth.

The latest NODX growth figure, reported on Thursday by trade promotion agency International Enterprise Singapore, fell short of the market's forecast of 9.1 per cent and June's upward revision of 8.8 per cent, prompting economists such as DBS Bank's Irvin Seah and ANZ's Ng Weiwen to believe that the export rally has peaked.

Mr Seah predicted that the headline NODX figure "should be running sideways, with a slight bias on the downside in the coming months". "The party is still going, just that the music is getting softer," he said in a brief note to clients.

Like UOB's Francis Tan, he is concerned that China, Singapore's biggest export market, will see its economic growth slow down in the second half of the year, which may pose some risks to the NODX.

But others such as Maybank Kim Eng's Chua Hak Bin, Citigroup's Kit Wei Zheng and OCBC Bank's Barnabas Gan say the NODX will continue to power on and drive economic recovery, at least till the end of the current quarter.

"External demand remains supportive of growth early in the second half," said Mr Kit.

Both he and Dr Chua indicated that electronics shipments and re-exports - a proxy for regional trading sentiments - appear to be strengthening.

Even DBS's Mr Seah noted that electronics exports, the key driver of the current NODX rally, have stayed resilient.

ANZ's Mr Ng added: "Electronic NODX shipments to China continued to expand by 37 per cent in July, led by integrated circuits (+49.8 per cent). The next tech cycle upswing in the third quarter, on the back of upcoming mobile phone product launches, should continue to bolster regional tech demand."

UOB's Mr Tan was less upbeat. He suggested that the current electronics cycle might end with the roll-out of the next wave of smart phones in the current half of the year.

OCBC's Mr Gan, who expected the NODX to clock 7.4 per cent growth for the full year, estimated that the NODX expanded 9.1 per cent in the first seven months of the year, higher than the official 5-6 per cent growth for the full year.

July's NODX growth is also still above the full-year forecast.

Nomura's Euben Paracuells and Brian Tan, as well as Citigroup's Mr Kit, blame the 53.6 per cent plunge in pharmaceuticals shipments for the NODX's lower-than-expected performance last month.

Month on month, the NODX's seasonally-adjusted 2.5 per cent dip in July was also deeper than the market's forecast of a 0.4 per cent fall and June's 2.2 per cent drop.

IE Singapore said the NODX's year-on-year growth in July was driven by the increase in both electronics and non-electronic exports.

Thanks partly to a favourable base effect, electronics NODX shipments rose for the ninth straight month in July, bouncing back from a single-digit 5.4 per cent rise in June to a double-digit 16.3 per cent jump.

The primary contributors to the increase were exports of integrated circuits (+31 per cent), personal computers (+9.9 per cent) and disk media products (+5.9 per cent).

Non-electronic exports expanded by a slower 5.2 per cent, after speeding at 10.1 growth in June. Stronger shipments of specialised machinery (+82.1 per cent), petrochemicals (+38.3 per cent) and non-electric engines and motors (35.3 per cent) were the main drivers of the expansion.

NODX exports to nearly all top 10 markets went up in July; the exception were the EU (-22.3 per cent) and the US (-5.9 per cent).

Exports to China (+20.9 per cent), Thailand (+55.3 per cent) and South Korea (+45.3 per cent) were the main contributors to NODX's growth in July.

IE Singapore also reported that total merchandise trade jumped 14.0 per cent in July, marking the ninth straight growth month. Non-oil re-exports rose 17.5 per cent, extending the 8.3 per cent growth in June.

Non-oil retained imports of intermediate goods, a leading indicator, fell from a seasonally-adjusted S$5.2 billion in June to S$4.6 billion in July.