Non-oil exports down for second month running

Singapore

SINGAPORE'S non-oil domestic exports (NODX) fell year on year in May for the second month in a row, said International Enterprise (IE) Singapore on Friday.

The dip of 1.2 per cent beat expectations of a 5.6 per cent contraction, and economists agreed that the decline was not a cause for concern at this point; they expect the figure to return to positive territory in the next few months.

The trend of a two-speed economy continued, with electronics exports outperforming and the non-electronics segment continuing to show weakness.

Electronics exports rose for the seventh consecutive month, jumping 23.3 per cent year-on-year in May, compared to the increase of 4.8 per cent in April.

This surge, however, was not enough to pull up non-electronics exports, which shrank 9 per cent, weighed down once again by the volatile pharmaceuticals segment, which fell by 14.2 per cent.

On a month-on-month basis however, NODX rose by a seasonally adjusted 8.1 per cent in May, a marked improvement from April's decrease of 9 per cent.

IE Singapore had earlier revised Singapore's NODX forecast for 2017 to 4 to 6 per cent growth for the full year, up from earlier estimates of zero to 2 per cent.

In a report by Maybank, economists Chua Hak Bin and Lee Ju Ye wrote: "Trade data for May paints a bullish picture, despite the negative headline print for non-oil domestic exports."

The economists said that the contraction in May largely rose from the high base of May 2016, when NODX were at a 14-month high.

They pointed out that electronics export growth - which they deem as a more reliable gauge of global demand - actually accelerated in May, with the tech upswing showing no signs of moderation.

The Maybank economists were sanguine, but several other industry watchers suggested that the pace of electronics export growth could let up, albeit gradually, at the end of the year.

UOB Bank does not expect the strong double-digit NODX growth from last November to be sustained in the second half of this year, even though it maintains a positive outlook on overall NODX expansion in 2017.

This is likely from the current electronics cycle coming to an end with the rolling out of the next wave of smartphones later this year.

On the other end of the spectrum, DBS senior economist Irvin Seah said the decline in the headline NODX number was a clear sign that the export rally is losing steam and that export demand may be peaking.

He said: "Plainly, while the electronics cluster continues to be the bright spark, the fact that there are marginal spillovers to the rest of the economy remains a concern."

Electronics export growth was driven by integrated circuits, which went up 31.2 per cent, personal computers at 64.7 per cent, and parts of personal computers at 26.2 per cent.

Non-electronics exports were weighed down by civil engineering equipment parts (-92.5 per cent), non-monetary gold (-24.6 per cent) and pharmaceuticals (-14.2 per cent).

Exports to Singapore's top 10 NODX markets grew at a faster pace in May, except for exports to Hong Kong and Taiwan. The largest contributors to the increase in NODX were China at 36.4 per cent, South Korea at 64.3 per cent, and the European Union at 16.2 per cent.

However, DBS's Mr Seah cautioned that tightening credit conditions and stiffer regulations on the property market in China could weigh on consumer sentiment and indirectly on Singapore's exports going forward.

Oil domestic exports expanded by 39.3 per cent year-on-year in May, following the 39.7 per cent growth in the preceding month. This is on the back of higher sales to China, Vietnam and Indonesia, which contributed the most to the increase.

Non-oil re-exports, a measure of regional and global trading sentiment, grew by 14.3 per cent in May from a year ago, an improvement from the 0.3 per cent decline in April.