Surprise rebound in Singapore's non-oil exports

Nodx surged last month by 6.8 per cent year on year after a revised 5 per cent drop in November. ST PHOTO: LIM YAOHUI

Singapore's non-oil domestic exports (Nodx) posted their first gain in three months in December, defying market expectations of a drop and reinforcing the cautious optimism for this year.

Nodx last month surged 6.8 per cent year on year after falling a revised 5 per cent in November and 3.1 per cent in October, Enterprise Singapore (ESG) said yesterday.

Before October, Singapore had seen four consecutive months of Nodx growth.

The December growth defied economists' expectation of a 1.1 per cent contraction, as polled by Bloomberg, and took the 2020 Nodx rise to 4.8 per cent.

The full-year growth also defied a global recession and comes after a 9.2 per cent slide in 2019.

ESG attributed the December gain mainly to shipments of non-electronic goods.

On a month-on-month seasonally adjusted basis, Nodx rose by 6.6 per cent in December - again higher than the 3.5 per cent rise forecast in the Bloomberg poll - extending the previous month's 3.7 per cent increase.

Electronics grew 13.7 per cent, but mainly due to a low year-ago base, ESG said. Electronics Nodx gains last month were mostly due to a 16 per cent surge in integrated circuits shipments, which had contracted 25 per cent in December 2019 amid the global electronics downcycle.

Non-electronics Nodx rose by 5 per cent last month, after a 5.3 per cent decline in the previous month. The gains were led by specialised machinery, non-monetary gold and measuring instruments.

The bulk of the specialised machinery shipments went to South Korea, in line with robust global semiconductor demand.

Non-monetary gold exports were helped by the spike in the precious metal's international price, which rose above US$1,900 per ounce last month amid reports of stimulus measures in the United States.

A new wave of lockdowns in Britain also lent support to the safe haven asset's demand.

Mr Barnabas Gan, an economist at UOB Group, said: "December's expansion of Nodx does paint an optimistic backdrop for 2021."

While he said Nodx will continue to expand this year, backed by a vaccine-driven recovery in global demand, he added a modicum of caution, keeping his forecast at 1 per cent against ESG's outlook of 0 per cent to 2 per cent growth.

Mr Sin Beng Ong, a Singapore-based analyst at JP Morgan, said the recovery may take firmer hold in the second half of the year as the next few months could be marred by periodic volatility amid new waves of Covid-19.

Maybank Kim Eng analyst Chua Hak Bin was more optimistic with a forecast of 3 per cent to 4 per cent expansion in 2021 Nodx. "Healthy demand for semiconductors, along with the recovery of non-electronics such as petrochemicals, will likely support the growth," he said.

However, the US-China technology war presents a downside risk as tensions between the world's two top economies may not dissipate under the new Joe Biden administration, he warned.

Nodx to the top markets as a whole grew last month. Still, exports to China, the EU 27, Indonesia and Japan declined. The largest contributors to the Nodx increase last month were the US (+52.5 per cent), South Korea (+46.2 per cent) and Taiwan (+14.8 per cent).

ING's Asia-Pacific head of research Robert Carnell said Singapore Nodx beat expectations despite a weak external environment bogged down by Covid-19 infections and lockdowns worldwide.

He noted it is not unusual for Nodx forecasts to be wide of the mark, as the data represents a number of very volatile components. "But other trade data for the region has been reasonably positive so far this month, so it is not a big surprise that the miss was on the upside."

Mr Carnell pointed out that the country breakdown of Singapore's December exports should raise curiosity about the relative strength of the world's top economies.

"Despite its comparative global strength, China was one of the weakest destinations, registering a 27.5 per cent year-on-year decline. The US, on the other hand, reeling under Covid-19, registered a 52.5 per cent increase," he noted. "We probably need to see another month or two of this data to make sense of this directional curiosity."

Mr Euben Paracuelles, analyst at Nomura International in Singapore, said external demand should hold up in the near term and improve further in the second half of 2021, when more synchronised global growth is expected.

He said Nomura's leading index of Asia excluding Japan aggregate exports has shown signs of stabilising at a high level in the first two months of this year, pointing to Nodx growth remaining robust in the near term.

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A version of this article appeared in the print edition of The Straits Times on January 19, 2021, with the headline Surprise rebound in Singapore's non-oil exports. Subscribe