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S'pore exports back in negative territory with 6.6% fall in May
[SINGAPORE] It appears that the recovery in the developed markets has yet to fully filter through to Singapore's exports.
After inching up 0.9 per cent in April, non-oil domestic exports (NODX) unexpectedly slipped 6.6 per cent from a year ago in the following month, returning NODX to negative terrain where it has languished in recent months.
International Enterprise Singapore, the government's trade promotion agency that released the latest trade numbers yesterday, said NODX was dragged down by both smaller electronics and non-electronics domestic shipments.
Domestic exports to the European Union, the Republic's biggest market, fell even more last month - by 22.6 per cent, more than double the 10.9 per cent drop in April. Shipments to the United States tumbled 8.8 per cent after an 11.7 per cent jump the previous month.
Meanwhile, the regional trade that has been propping up the local economy has also started to show signs of weakness. Non-oil re-exports, which go mostly to markets in the region, fell 4.7 per cent in May, reversing 13 straight months of growth.
UOB Bank economists Francis Tan and Jimmy Koh said in a brief note that this was due partly to a high base in the same month last year. But Citigroup's Kit Wei Zheng thinks the growth momentum in the related wholesale trade was also waning.
Among its top 10 markets, domestic exports in May dropped in South Korea, Japan, Taiwan, Hong Kong and Thailand. China, Malaysia and Indonesia were the only exceptions.
Probably because of Thailand's political crisis, Singapore's NODX shipments to the country plunged 29 per cent last month - the steepest decline among the top 10 markets.
NODX's disappointing showing in May came after private-sector economists, eyeing the recovery signs in the major economies, especially the US, had predicted an average 0.5 per cent on-year rise.
Month on month, NODX fell a seasonally adjusted 7.5 per cent in May, against a 9 per cent surge in April.
The economists had been looking at a 0.6 per cent increase. Disappointed, the UOB economists have downgraded their full-year NODX growth forecast from 7 per cent to 4 per cent - though this is still higher than the official forecast for one to 3 per cent growth.
Economists expect the electronics sector to be one of the biggest losers if Singapore fails to benefit from the projected recovery in the developed markets.
Electronic NODX extended their decline for a 22nd consecutive month with a 15.3 per cent decline in May, after an 8.7 per cent fall in April. While Barclay's Wai Ho Leong reckons this was due more to the number of public holidays last month, especially in South Korea and Taiwan, he concedes that the drop was more pronounced than expected.
Philip McNicholas of BNP Paribas sees the electronics sector already in "secular decline", while the UOB economists indicate that its share of total NODX has fallen from half a decade ago to 28.7 per cent in the first five months of 2014.
Citigroup's Mr Kit is worried that electronics NODX's under-performance against competitors in North Asia and South-east Asia may reflect Singapore's loss of competitive edge in exports.
The situation has been compounded by a drop in the non-electronics NODX, which dipped 2.4 per cent in May, against a 5.5 per cent jump in April.
All this does not augur well for the economy in coming months.
"At best, the latest data suggests trade-related sectors have yet to contribute meaningfully to sequential GDP growth in the second quarter - though we look to May's industrial production figures next week for confirmation," Mr Kit said.
Added Chua Hak Bin of Bank of America Merrill Lynch: "Slowing non-oil exports and re-exports in recent months amid further tightening of foreign worker policy will likely mean both weaker manufacturing and services growth in the second quarter."