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Volatile pharma drives Singapore non-oil exports up 11.8% in July to beat forecasts

Singapore's non-oil domestic exports (NODX) came in ahead of expectations in July, helped by a jump in seasonally volatile pharmaceuticals, despite the continued slide in electronics shipments.

SINGAPORE'S non-oil domestic exports (NODX) came in ahead of expectations in July, helped by a jump in seasonally volatile pharmaceuticals, despite the continued slide in electronics shipments.

NODX grew by 11.8 per cent on the previous year, according to Enterprise Singapore data released on Friday. This was far ahead of the revised 0.8 per cent uptick in June, and well up on the market consensus of a 7.4 per cent rise.

Non-electronic shipments were higher by 18.8 per cent year on year, after rising by 4.5 per cent in the month before, as this segment offset the contraction in electronics exports.

The growth was fuelled by pharmaceuticals exports, which surged by 109.2 per cent on the year-ago period, as well as food preparations and primary chemicals.

Meanwhile, electronics shrank by 3.8 per cent, improving from the 8.6 per cent decline in June but still dragged down by integrated circuits, diodes and transistors, and personal computer parts.

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Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye remarked: "With electronics exports now in its eighth month of decline, we think that production numbers will correct by the end of the year. June numbers have already shown an easing in electronics production, especially for semiconductors."


Domestic exports to Singapore's top 10 markets were up in July - except for Hong Kong, South Korea and Thailand - supported by the United States, Japan and Indonesia.

Selena Ling, head of treasury research and strategy at OCBC Bank, said: "Notably, NODX to China was flat on-year in July after shrinking by 15.8 per cent year on year in June. Even though non-electronics NODX to China rose 9.1 per cent year on year in July, this was insufficient to offset the 20.3 per cent year on year drop in electronics NODX, and the latter could be reflective of some spillover effects from the US-Sino trade spat."

Non-oil re-exports (NORX), an indicator of wholesale trade performance, rose by 8.5 per cent after notching a 5.2 per cent gain the previous month, again with non-electronic re-exports outweighing a decline in electronics.

Total trade stayed up altogether, with growth in both imports and exports. The increase of 17.6 per cent in July extended June's 10.2 per cent gain.

Maybank Kim Eng's Dr Chua and Ms Lee in their report that the impact of the looming US-China trade war will be more apparent by year-end. "July trade numbers may have been distorted by companies stocking up in anticipation of higher US and China tariffs in coming months," they said.

Economist Tan Khay Boon, senior lecturer at SIM Global Education, said the China market, once a major export destination, looked increasing vulnerable amid trade tensions. "The improvements in July 2018 trade performance may not be sustained if no amicable solutions arise out of the coming trade talk between the US and China," he said.

Meanwhile, Robert Carnell, ING Asia-Pacific's chief economist and head of research, called the latest data "a useful start to the third-quarter activity backdrop" but expressed concern over the outsized impact of pharmaceuticals exports.

"It's not that we have anything against phamaceuticals," he said in a note. "But for some time now, the NODX figures seem to be finding their support in extraordinary strength in usually just one aspect of the export figures, and that makes us nervous that the headline is vulnerable to a downward correction."

OCBC's Ms Ling also noted that "pharmaceuticals output and exports can be rather volatile depending on the turnaround for each production cycle, so it is unclear how long this current uptick will sustain beyond the immediate few months ahead".

She added that a high NODX base in the August to December 2017 period and the trade tensions between the United States and China "may still pose some headwinds for NODX growth in the coming months", but OCBC has still forecast a bullish full-year growth of between 4 per cent and 5 per cent.

The Singapore government raised its full-year NODX growth forecast for 2018 on Monday, to between 2.5 per cent and 3.5 per cent, up from 1 per cent to 3 per cent previously. The upward revision came as exports rose 9.4 per cent year-on-year in the second quarter, much stronger than the first quarter's 1.1 per cent increase on the back of sector-specific rising exports in food and beverages, machinery and pharmaceutical goods.

But the Ministry of Trade and Industry has also cautioned that downside risks, such as trade tensions, rising global interest rates and tightening financial conditions, may weigh on global growth and trade flows.

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