June exports fall as growth slows in key markets

Shipments of electronic and non-electronic goods both fell. Electronic exports contracted 1.7 per cent year on year last month, narrowing from a 6 per cent decline in May, while non-electronic shipments shrank 2.5 per cent from May's 19 per cent expa
Shipments of electronic and non-electronic goods both fell. Electronic exports contracted 1.7 per cent year on year last month, narrowing from a 6 per cent decline in May, while non-electronic shipments shrank 2.5 per cent from May's 19 per cent expansion. PHOTO: REUTERS

NODX's 2.3% fall better than market forecast, with electronic shipments' decline narrowing

Exports plummeted back to earth last month after skyrocketing 11.6 per cent in May, with shipments to key markets dropping.

Sluggish global growth continued to take a toll on Singapore's exports to its two largest markets - China and the European Union - and Indonesia.

Non-oil domestic exports (NODX) fell 2.3 per cent last month compared with the same month last year, although that did beat market forecasts of a 3 per cent drop.

Shipments of electronic and non-electronic goods both fell.

Electronic exports contracted 1.7 per cent year on year last month, narrowing from a 6 per cent decline in May, while non-electronic shipments shrank 2.5 per cent from May's 19 per cent expansion.

Economists said the surge in May was not meant to last as it stemmed largely from a one-time jump in exports of prefabricated buildings and non-monetary gold and so was unlikely to be sustainable.

In fact, sharp spikes in these sales have masked an otherwise sluggish growth outlook. Except for Taiwan, the United States, Hong Kong, South Korea and Malaysia, shipments to the rest of the top 10 markets fell last month, led by China, the EU and Indonesia, according to trade agency International Enterprise (IE) Singapore yesterday.

Exports to China - Singapore's largest market - remained weak, contracting 9.9 per cent last month after a 10.1 per cent decline in May.

"This has been an ongoing phenomenon since mid-last year, and it once again underscores the effects of China's slowdown on Singapore. With China's deceleration being a structural one, the lacklustre NODX performance could last for a while," said DBS senior economist Irvin Seah.

Citi economist Kit Wei Zheng pointed to the risks of the possible impact of Brexit coupled with a sharp slowdown in China and the US.

Month on month, NODX slumped by a seasonally adjusted 12.9 per cent last month, in sharp contrast to May, when shipments grew 16.8 per cent.

While the 2.3 per cent year-on- year drop last month for NODX is in line with expectations, the extent of the downswing has been more severe than expected, Mr Seah said.

"This is, yet again, another reminder that prospects on the external front are not that bright after all. And this is despite the better-than-expected advance GDP estimates in the second quarter."

Official GDP growth forecasts for this year remain at between 1 and 3 per cent, but private sector economists have been toning down their estimates. UBS expects Singapore's GDP to grow by 1.5 per cent this year, said Ms Lee Wen Ching, a director at UBS Wealth Management's chief investment office.

But UOB economist Francis Tan pointed to signs of green shoots in integrated circuit (IC) exports.

"ICs are an important segment as they had contributed 46 per cent of total electronic exports in 2015. In June, this segment broke away from eight consecutive months of contraction to register a 7 per cent year-on-year expansion."

A version of this article appeared in the print edition of The Straits Times on July 19, 2016, with the headline 'June exports fall as growth slows in key markets'. Print Edition | Subscribe