Quick takes: Singapore Sept NODX is weaker than expected

SINGAPORE'S non-oil domestic exports (NODX) rose just 0.9 per cent year on year in September, shrinking 8.8 per cent month on month after seasonal adjustments, International Enterprise Singapore said on Friday morning. This was weaker than the 2.8 per cent year-on-year growth and the 4.3 per cent month-on-month decline the market had been expecting.

Here's what private-sector economists had to say:

What was behind the weaker-than-expected performance?

Citi economists Kit Wei Zheng and Yap Kim Leng:

"In real terms, NODX fell 1.9 per cent month on month seasonally adjusted, and was up a larger 3.2 per cent versus Q2 2014, suggesting that the large headline drop was more due to weak export prices rather than volumes."

OCBC economist Selena Ling:

"Electronic NODX, which fell a less severe 4 per cent year on year in September compared to a 6.9 per cent year-on-year drop in August, was weighed down by parts of PCs, ICs and disk drives. Nevertheless, this still marked the 26th straight month of weakness in the sector. Note that the North American semiconductor book-to-bill ratio has also softened since the 1.1 peak seen in June to around 1.04 in August 2014, reflecting the slower order momentum in Q3."

What might this mean for Singapore's economic outlook?

ANZ economists Daniel Wilson and Glenn Maguire:

"The sharp fall sequentially does not bode well for the Q3 GDP revision in late November. There are likely downside risks to the 2.4 per cent year-on-year advance estimate for Q3 GDP. However, with a pick-up in re-exports, Singapore's services sector may be able to help offset moderate manufacturing growth. We will look to next week's industrial production figure for further guidance on a possible growth downgrade."

Bank of America Merrill Lynch economist Chua Hak Bin:

"Singapore's NODX performance has lagged behind export growth of Asian peers such as Malaysia, Korea and Taiwan. Restructuring efforts and a weak global PC market explain the bulk of the lag. Stronger US growth will help boost exports, but we think restructuring and stricter foreign worker policies will limit the lift."

UOB economists Francis Tan and Jimmy Koh:

"As electronic NODX continues to contract it will play a less-significant role in Singapore's exports going forward. The share of electronic NODX to overall NODX had declined to around 29 per cent in September, compared to the 66 per cent and 41 per cent share during years 2000 and 2010 respectively.

We postulate that Singapore's NODX may continue to shrink as several structural changes could be at play:

  • Lower value-added and land or labour-intensive manufacturing industries continue their shift outside of Singapore due to industry-specific competitive disadvantages
  • Manufacturers moving towards specialising in services exports and/or re-exports rather than domestic goods exports
  • The lower contribution of Singapore's manufacturing industries going forward as the economy restructures towards an even more services-oriented model."

What do the other details of the trade release show?

Citi economists Kit Wei Zheng and Yap Kim Leng:

"Depressed levels of non-oil retained imports (NORI) may suggest lingering caution on the part of manufacturers in restocking parts and components, given the recent downshifting expectations for global demand - especially from Europe and Japan - exacerbated by a loss of domestic cost competitiveness and market share erosion."

ANZ economists Daniel Wilson and Glenn Maguire:

"However, non-oil re-exports (NORX) rebounded sharply in September, reversing five consecutive months of level declines. On a level basis, NORX is at its strongest since April 2014. As a gauge of global demand, particularly in the G3, this is a positive sign."


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