March NODX falls 15.6%; Q1 output, GDP may be revised downwards

Singapore

NON-OIL domestic exports fell 15.6 per cent in March - its worst performance since February 2013 and exceeded the market's forecast of a 12.3 per cent slide.

But just as private-sector economists had pointed out that February's 2 per cent increase was exaggerated by a low base effect, they say that last month's drop was partly exacerbated by the high base in March last year.

OCBC Bank's Selena Ling noted that NODX jumped 18.5 per cent in the same month last year.

Yet, stripping out the year-on-year base distortion shows March's NODX to be still weak. Against February, it eked out a seasonally adjusted 0.2 per cent uptick, after a 4.2 per cent fall in the month before, according to the latest official trade figures released on Monday.

While this is still better than the 3 per cent decline that economists had expected, DBS Bank's Irvin Seah dismissed the month-on-month increase as "outright paltry", pointing out that the overall trend is still down. "All externally driven statistics are unanimously heading south."

Mr Seah said that March's "sub-par" export numbers may lead to a downward revision in manufacturing output as well as the GDP (gross domestic product) growth figures for the first quarter.

Weighing in, Nomura's Eugen Paracuelles and Brian Tan said that the outlook for Singapore's economy remains weak. They indicated that non-oil re-exports, which are linked to the wholesale trade services sector, fell 2.4 per cent last month after a 1.8 per cent increase in February.

International Enterprise Singapore, the trade promotion agency which put out the trade figures, blamed NODX's fall in March on the poor showing of both the electronics and non-electronics NODX.

Domestic electronics shipments in March sank 9.1 per cent, following a 0.7 per cent uptick in February. Non-electronics domestic exports tumbled 18 per cent, against a 2.6 per cent rise the month before.

DBS's Mr Seah noted that pharmaceutical shipments, which surged 40 per cent in February, dived 30.9 per cent in March. "This cluster has turned from being a driver to a drag given its volatile nature," he said.

Clearly, external markets have not recovered. Except for Japan and Hong Kong, shipments to all Singapore's top 10 markets shrunk, with the bulk of them posting double-digit contraction. China, the EU and Indonesia were the biggest contributors to NODX's decline in March.

NODX to the EU tumbled 39.1 per cent, after a 16.1 per cent rise in February. Goods flowing to China dropped 14 per cent in March, extending the 1.2 per cent dip in the previous month.

NODX to Indonesia fell 20.2 per cent, more than the 5.9 per cent drop in February.

"Global demand remains weak," Mr Seah said. "And export outlook is further weighed down by the slowdown in China. Exports to China have been falling and that has been the main drag on overall export performance in the past 10 months."

He said that China's slowdown is structural in nature, which suggests NODX weakness is here to stay for a while.

OCBC's Ms Ling added: "There is no light at the end of the tunnel for the currently sluggish external demand conditions."

UOB Bank's Francis Tan, who predicted NODX's rise in February to be "a one-month wonder", said: "The medium-term trend for Singapore's NODX performance is still weak and we are also expecting NODX to contract in next month's report."

With NODX already down 10.1 per cent in January, the latest drop means that first-quarter NODX was still in retreat. Citigroup's Kit Wei Zheng estimates first-quarter NODX to be 6.4 per cent below the levels of the previous quarter. In real terms, it's 4.8 per cent below.

UOB's Mr Tan expects the contraction to extend to the second quarter, resulting in a 3.3 per cent decline in NODX in the first half of 2016. He tips NODX to pick up only in the second half of the year - and it will be strong enough to lead to a 2.1 per cent increase for the full year.

But Mr Tan cautions that "there could be downside risks to our forecast should the uncertainties in China's growth" and low oil prices persist.

IE Singapore has forecast NODX to grow 0-2 per cent in 2016, after it fell 0.1 per cent in 2015.