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September NODX stuns economists with reversal into contraction

Former star performer electronics turns into big drag; economists had expected 4 months of growth to continue with double-digit expansion in Sept

SG Exports NODX 15822094.jpg
Singapore's exports continued to record growth in November, but has eased from October's stellar showing due to high base effects from a year ago and slowing electronic shipments.


AFTER four months of solid expansion, Singapore's exports stunned economists with a 1.1 per cent contraction in September, led by erstwhile star performer electronics.

The big question now is: does the pullback signal that the party is over for Singapore's exports, or does it mean a temporary slowdown for the rest of the year, as many private-sector economists have predicted?

The fall was even more stark on a month-on-month basis, with the NODX tumbling by a seasonally adjusted 11 per cent, reversing the previous month's 4.2 per cent rise.

The market did not see the drop coming after August's 16.7 per cent surge, let alone the extent of it, with economists predicting a 12.7 per cent expansion. Yet most of them take the September NODX dip as a sign that growth would ease in the months ahead, even if it has come sooner than some have thought.

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End of Nodx spike

"While we had expected some NODX retraction in the fourth quarter of the year due to the higher base in the fourth quarter of 2016, the drop-off in NODX momentum admittedly came slightly earlier than expected," said Selena Ling, head of Treasury Research at OCBC Bank.

She said the NODX might flip back to growth in October, but it would revert to contraction again in November and December.

Singapore's NODX has risen an average 8.3 per cent in the first nine months of the year. Going by trade promotion agency International Enterprise (IE) Singapore's forecast, NODX growth will have to ease or dip in the remaining months of 2017 to meet its full-year growth forecast of 5-6 per cent.

Chua Hak Bin, senior economist at Maybank Kim Eng Research, said the trade numbers would have to moderate not only in the October-December quarter, but also in 2018, because of high base effects.

UOB Bank's Francis Tan indicated that electronics shipments, the driving force behind the past few months' strong trade numbers, would not have kept up with the pace of growth, especially with the end of the current electronics cycle in sight now that the latest wave of smartphones has been rolled out.

IE Singapore, which released the latest trade data on Tuesday, in fact singled out the drop in domestic electronics shipments for blame for the NODX's fall in September - in particular, "the decrease in electronics NODX off the high base a year ago".

While the electronics NODX fell 6.6 per cent in September 2016, it still amounted to S$4.1 billion in exports, higher than the average S$3.8 billion exports for the first nine months of last year, according to an IE Singapore spokesman.

After 10 consecutive months of expansion, the electronics NODX slipped 7.9 per cent last month, the worst showing since August 2016 and a big comedown from the 20.8 per cent increase in August 2017. It was dragged down mostly by exports of personal computers, integrated circuits and diodes and transistors which fell 17.6, 4.1 and 18.1 per cent respectively.

The non-electronics NODX continued to rise in September but at just 1.9 per cent, could not counter the slump in electronics NODX. The slowdown in non-electronics NODX growth, from 15 per cent in the previous month, was due to a steeper decline in pharmaceuticals shipments (minus 36 versus minus 9.1 per cent in August) as well as softer exports of non-monetary gold (+70 versus +138 per cent in August), petrochemicals (+12 versus +32 per cent in August) and specialised machinery (+16 versus +45 per cent in August).

NODX exports to most of the top 10 markets also softened, with lower shipments to Hong Kong (minus 21 per cent), the European Union (minus 8.9 per cent) and Thailand (minus 9.1 per cent). Asian markets contributed to most of NODX's gains last month, in particular Malaysia (+21.3 per cent), China (+9.6 per cent) and Japan (+18.1 per cent).

Yet, regional trading sentiment was weak, with non-oil re-exports barely up at 0.5 per cent, a far cry from the 11.8 per cent growth posted in August.

Total export growth also eased in September to 3.8 per cent from 15.1 per cent in August, according to IE Singapore. Along with a 9.1 per cent rise in imports, moderating from 15.8 per cent growth in the previous month, it kept overall trade expansion going last month, though slowing from a 15.4 per cent rate in August to 6.2 per cent.

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