Analyst takes: Any silver lining in the latest 7.9 per cent slide in Singapore exports in April?

Workers looking as a container ship is unloaded at a berth in Singapore.
Workers looking as a container ship is unloaded at a berth in Singapore. PHOTO: REUTERS

SINGAPORE - Non-oil domestic exports (Nodx) - the main measure of Singapore shipments - fell 7.9 per cent in April from the same month last year. Here are some analysts' views on what these latest figures mean:

DBS Senior Economist Irvin Seah

Nodx fell by 7.9 per cent year on year in April. While this is an improvement from the 15.7 per cent plunge in the previous month, it's premature to call the bottom at this juncture.

Ultimately, the decline has been broad-based with contractions in exports of both electronics and non-electronics products. Moreover, except for Europe and Hong Kong, export growth to all key markets was in the red, underscoring the persistent weakness in global demand.

 

Perhaps the only silver lining is that Nodx rose by 4.5 per cent month on month seasonally adjusted. But this could just be a technical payback from two consecutive months (Feb-March) of exceptionally low export values. The biggest concern is that non-oil retained imports of intermediate goods (Nori) have continued to fall. This is the second consecutive month of decline and the extent of moderation has been rather significant. Lower Nori essentially makes for lower export values later on.

In short, we're not out of the woods yet as far as export performance is concerned. Manufacturers/exporters are still struggling with weak demand and this will eventually manifest itself in the headline gross domestic product (GDP) growth figures. All is not well on the external front. Time to tighten the belt.

UOB Global Economics and Market Research

Singapore's April Nodx contracted 7.9 per cent year on year, slightly better than Bloomberg consensus estimates of -8.4 per cent year on year. And even as this decline is half of the -15.7 per cent lump it suffered in March, this is cold comfort to the broader economy and marks a gloomy start to Singapore's second quarter GDP. On seasonally-adjusted sequential basis, Nodx rose 4.5 per cent month on month in April, a marked improvement from the anaemic 0.1 per cent growth in March.

The medium term trend for Singapore's Nodx performance is still a weak one and we should expect Nodx to clock in few more contractions in next few months although we are not looking for double-digit declines. Part of the reason for expecting more subdued on-year contraction was due to favorable base effects (where Nodx contracted -0.3 per cent year on year in May 2015, grew 4.5 per cent year on year in June 2015, and then contracted again -0.7 per cent year on year in July 2015). That said, the Baltic Dry Index - an indicator of global trade volume - remained inconclusive in its recovery. Having hit its recent bottom at 290 on 10 Feb 2016, the Baltic Dry Index was on a steady increase to a recent peak at 715 on April 27 but has since been trending weaker, currently at 613 (as of 16 May 2016). It also remained well off its 1-year peak of 1,222 recorded on Aug 5, 2015.

OCBC Bank, Head of Treasury Research & Strategy, Ms Selena Ling

Nodx shrank for a second month by 7.9 per cent year on year (+4.5 per cent month on month seasonally adjusted) in April, worse than our forecast of -6.5% year on year (+9.2 per cent month on month seasonally adjusted) and the March Nodx data was also revised a tad down to -15.7 per cent year on year.

Electronics exports contracted by 7.4 per cent year on year, following a 9.1 per cent slump in March, as PCs, PC parts and ICs exports underperformed.

Non-electronics exports also declined 8.1 per cent year on year, weighed down by volatile ship & boat structures (-94.3 per cent year on year), petrochemicals (-16.7 per cent year on year) and civil engineering equipment parts (-54 per cent year on year), despite pharmaceuticals exports rising 17.9 per cent year on year (the silver lining?).

Separately, Nodx to all eight of the top 10 Nodx markets fell in April, dragged down by Taiwan (-22.5 per cent year on year), South Korea (-16.7 per cent year on year) and Indonesia (-20.4 per cent year on year), and with the exception of EU28 (+20.6 per cent year on year) and Hong Kong (+13.5 per cent year on year).

· The trade outlook, especially for the region, remains lacklustre, and this Nodx slump could drag into the second quarter of 2016. We expect second-quarter GDP growth to potentially contract up to 1 per cent quarter on quarter seasonally adjusted as manufacturing underperformance persists (forecast: -2.1 per cent year on year).

Nomura Global Markets Research

Nodx continued to contract sharply in April, down 7.9 per cent year on year after falling by 15.7 per cent in March (Consensus: -8.4 per cent, Nomura: -9 per cent). On a sequential basis, seasonally adjusted Nodx rose by 4.5 per cent month on month in April after a 0.1 per cent increase in March.

Electronics exports remained weak, declining 7.4 per cent year on year in April after falling by 9.1 per cent in March. In sequential terms, the official press release stated that seasonally adjusted electronics exports were flat, in contrast to the expansion in non-electronics exports. Exports of pharmaceuticals, which tend to be volatile, surged by 17.9 per cent year on year in April after a sharp 30.9 per cent decline in March, helping reduce the contraction in headline Nodx. Excluding pharmaceuticals, we estimate Nodx growth barely improved at -11.3 per cent year on year from -13.4 per cent in March, suggesting a still weak underlying picture. By destination, the decline in Nodx growth was led by South Korea (-26.7 per cent), Taiwan (·22.5 per cent), Indonesia (-20.4 per cent) and Japan (-10.1 per cent).

Overall, the data remain consistent with our view that the outlook for the Singapore economy remains weak. We note that non-oil re-export growth, which is linked to the wholesale trade services sector, also remained weak at -2.8 per cent year on year in April from -3 per cent in March. This suggests services activity will likely remain soft into the second quarter. We reiterate our 2016 GDP growth forecast of 1.8 per cent, slowing from 2.0 per cent in 2015.