Singapore’s key exports in June fall by deeper-than-expected 8.7%
Non-oil domestic exports to the Republic’s top markets as a whole decline
SINGAPORE’S key exports posted a deeper year-on-year decline in June, to the surprise of analysts who had been expecting a milder contraction.
This was due mainly to fluctuations in the shipments of volatile products such as non-monetary gold and electronics, data from Enterprise Singapore showed on Wednesday (Jul 17).
Non-oil domestic exports (NODX) shrank 8.7 per cent year on year last month, extending the revised 0.7 per cent contraction in May. Both electronic and non-electronic shipments fell.
Private-sector economists polled by Bloomberg had expected a year-on-year contraction of just 1.3 per cent.
On a seasonally adjusted monthly basis, NODX dipped by just 0.4 per cent in June to S$13.8 billion, easing slightly from the 0.7 per cent drop in the previous month.
Overall, total trade rose by 1.2 per cent year on year in June, extending the 13.9 per cent expansion in the previous month.
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Calling June’s NODX figures a “temporary setback” to the improvement seen in the two months prior, DBS economist Chua Han Teng said he continues to expect a “gradual and fragile” exports recovery.
“Base effects should be more favourable in (the third quarter), and the continued expansion in new export orders of Singapore’s headline manufacturing Purchasing Managers’ Index for the ninth straight month in June reflects improved external demand, which should benefit Singapore’s exports,” he said.
Electronic exports fell 9.5 per cent year on year in June, swinging from the 19.6 per cent expansion in the previous month. This was attributed to telecommunications equipment, disk media products and integrated circuits.
However, analysts were hopeful that the electronics sector was trending towards recovery, with UOB associate economist Jester Koh saying the pickup is “possibly delayed but not derailed”.
“Given the inherent volatility in NODX, we smooth the data by computing the year-on-year changes of the average NODX for the last six months to capture key trends,” he said.
He concluded that electronics NODX is improving incrementally from its weakest point in May 2023, reflecting the ongoing upturn in the electronics cycle.
DBS’ Chua agreed, noting that even the three-month moving average on a year-on-year basis has turned around significantly from the double-digit contraction in most of 2023.
Sheana Yue, an economist from Oxford Economics, said current conditions are probably “more favourable” for electronics, with demand rising now that the global electronics cycle has bottomed out.
She added that some businesses are investing heavily in chips again to ride the artificial intelligence (AI) wave, and structural shifts in electronics trade flows appear to be benefiting Singapore.
“At first glance, this seems volatile rather than sustained,” she said. “But after accounting for price effects, the electronics trade is holding up well.”
Still, Singapore’s electronics recovery may lag that of Taiwan and South Korea, said UOB’s Koh, since its semiconductor ecosystem is almost entirely built around mature-node chips, and may not benefit directly from AI-related demand.
Non-electronic shipments slid 8.5 per cent year on year in the same period, faring worse than the 6.1 per cent decrease in May. This was largely because exports of non-monetary gold tumbled 51.1 per cent, equivalent to a value of about S$600 million.
NODX to Singapore’s top markets as a whole declined in June, with the exception of Thailand, Malaysia, Indonesia and the eurozone.
In particular, exports to Hong Kong slumped by 41.9 per cent year on year, a complete reversal from the 73.4 per cent jump in May, as shipments of non-monetary gold sank by 84.8 per cent.
Exports to China continued to slide in June with an 11.2 per cent year-on-year fall, in part because non-monetary exports nearly halved.
NODX to the US contracted 21.3 per cent year on year in the same period, as electronic shipments fell sharply; there was a decline of 67.1 per cent in disk media products and 56.2 per cent in telecommunications equipment.
OCBC chief economist Selena Ling said this was likely because the US economy is cooling, while the contraction in exports to China was “not surprising” given its disappointing Q2 economic growth figures.
She added that there are downside risks to the full-year official NODX outlook of 4 to 6 per cent, given that H1 already stands at minus 4.9 per cent year on year.
UOB’s Koh said he is lowering his NODX outlook to 2.5 per cent, from 4.5 per cent previously, with a “more meaningful recovery” likely only in Q4.
Beyond the much-anticipated tech upturn, analysts also warned about uncertainties and other tailwinds.
“One uncertainty is ongoing geopolitical conflicts that could disrupt supply chains, with port congestion already occurring from the re-routing and diversion of vessels from the Red Sea,” said DBS’ Chua.
“Another uncertainty pertains to economic policy, such as the extent of future US interest-rate cuts.”
Oxford Economics’ Yue believes monetary policy loosening is on the cards in key markets such as the US and the European Union, but that the impact of tight policy is likely to weigh on import demand for “a while longer”.
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