Singapore key exports surprise with 0.1% fall in February despite electronics growth

SINGAPORE’S non-oil domestic exports (NODX) slipped 0.1 per cent on year in February, dragged down by a decrease in the non-electronics sector, data from Enterprise Singapore (EnterpriseSG) showed on Monday (Mar 18).

This was in contrast with the 4.7 per cent median growth forecast in Bloomberg’s poll of private-sector economists, and a reversal from the 16.7 per cent expansion charted in the previous month.

The on-year decrease for non-electronic shipments offset electronics growth, economists said. But they added that base effects also likely contributed to last month’s marginal decline, with Chinese New Year (CNY) falling in February this year, versus January in 2023.

But economists said that NODX remained healthy at 8.4 per cent year on year in January and February, smoothing out CNY distortions. It was also healthy in volume, said Maybank economists Chua Hak Bin and Brian Lee.

UOB economists Alvin Liew and Jester Koh also said that the combined NODX data points to an “ongoing recovery”; and DBS economist Chua Han Teng said it marks a “decent expansion” compared with the weakness recorded in most of 2023.

The combined reading is an improvement from the 20.4 per cent year-on-year fall registered for the same period last year, noted OCBC chief economist Selena Ling.

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On a seasonally adjusted monthly basis, NODX declined 4.8 per cent in February, in an about-turn from the 2.2 per cent rise in the previous month. Non-electronics fell, while electronics increased.

Key exports’ value hit S$14.2 billion last month, seasonally adjusted, down from S$14.9 billion in January. It was also lower than the 2023 average of S$14.5 billion, but higher than the year-ago period’s S$13.5 billion.

Year on year, electronics exports gained 5.2 per cent in February, up from the previous month’s 0.6 per cent rise. This was the second consecutive positive reading, after 17 straight months of decline, noted the Maybank duo.

Integrated circuits or ICs (15.9 per cent), PCs (26.2 per cent) and parts of ICs (54.8 per cent) contributed most to the expansion.

“Notably, shipments of ICs expanded for the first time since July 2022,” said Dr Chua and Lee. “Likewise, parts of ICs saw positive growth not seen since October 2022.”

UOB economists, citing average NODX for the last six months, said electronics NODX exhibited “incrementally narrower contractions” from the weakest performance in May 2023, “which affirms the ongoing upturn in the electronics cycle”.

Non-electronics shipments last month slipped 1.5 per cent from the year-ago period, reversing from the 21.1 per cent jump in January. Contributing most to the drop were food preparations (-23.5 per cent), specialty chemicals (-19.7 per cent) and electrical circuit apparatus (-36.9 per cent).

But DBS’ Chua highlighted that, combining the first two months of 2024, non-electronics expanded by a “respectable” 9.8 per cent on a yearly basis.

NODX to Singapore’s top markets as a whole expanded in February, led by Hong Kong (143.6 per cent), the US (17.1 per cent) and Indonesia (8.2 per cent).

Conversely, exports to all other top markets tracked – Japan, Malaysia, Taiwan, the European Union (EU), Thailand, South Korea and China – declined.

Overall, total trade grew 3.5 per cent in February, down from the 14.1 per cent growth in January. Total exports last month rose 1.7 per cent, while total imports were up by 5.6 per cent. In January, total exports expanded 16.6 per cent, while total imports increased by 11.2 per cent.

On a seasonally adjusted monthly basis, however, total trade was down 0.5 per cent in February, following January’s 5.3 per cent growth.

On a seasonally adjusted basis, the level of total trade reached S$104.6 billion, less than the preceding month’s S$105 billion. Total exports declined 1.7 per cent, and imports rose 1 per cent.

“The export recovery remains intact, although the February figure was slightly weaker than anticipated,” said Maybank’s duo, adding: “The Red Sea crisis may have impacted exports in the early months of 2024, disrupting supply chains and delaying shipments.”

DBS’ Chua noted the “choppy” performance so far in 2024, and expects greater near-term volatility. Ling also acknowledged the “muted start” to the quarter. OCBC expects NODX to slide 8 per cent on year in March due to 2023’s high base, bringing the Q1 NODX to 2.9 per cent.

NODX recovery in 2024 will be supported by base effects, given sharp declines in electronics last year, said the UOB team. But sequential recovery could be challenging in H1, “given tight financial conditions in the US and EU”.

Economists agreed that while external demand is more promising, global economic uncertainties remain, especially in light of geopolitical tensions that could disrupt supply chains.

Ling said: “US Commerce Secretary Raimondo has said it wants to help the Philippines double its semiconductor facilities to lessen the concentration of the global chip supply chain from a few countries, and the US Commerce Department is considering adding several Chinese tech companies to its Entity List which restricts access to US technology.

“Meanwhile, China’s Ministry of Industry and Information Technology was reported to have asked EV (electric vehicle) car-makers including BYD and Geely to increase adoption of local auto chipmakers. (And) Republican nominee Donald Trump has threatened 100 per cent tariffs on Chinese cars manufactured in Mexico.”

The implications of these factors for Asean’s manufacturing outlook, particularly for the chip sector, “remains slightly cloudy”, she said.

Still, Purchasing Managers Index data, while marking an easing from the previous month in February, remained in expansionary territory, said economists.

EnterpriseSG last month upgraded its full-year forecast for NODX, projecting “modest growth” for the year ahead and an expected recovery in electronics.