Export slump in August worse than expected

Trucks transport containers at the Keppel Container Terminal on Dec 14, 2011.
Trucks transport containers at the Keppel Container Terminal on Dec 14, 2011.PHOTO: BLOOMBERG

8.4% fall, fuelled by broad weakness across sectors, underlines technical recession fears

Exports fell more than expected last month, underscoring fears over weak global growth and concerns that Singapore might fall into a technical recession this quarter.

Economists say the numbers, which come after a slew of disappointing data in recent weeks, add to mounting expectations that the central bank will act to ease the appreciation of the Singdollar when it meets next month.

Non-oil domestic exports plunged 8.4 per cent last month, far worse than economist estimates of a 3.5 per cent contraction. The latest slump was also a much poorer showing than in July, when these exports contracted 0.7 per cent.

Last month's fall in shipments was due to a broad weakness across export segments. Electronics shipments slid 2.7 per cent after a 2.5 per cent rise in July, but non-electronics goods dived 10.6 per cent, after slipping 2 per cent in July. All of Singapore's top 10 export markets suffered declines last month except Thailand, the United States and Hong Kong.

ANZ economists Ng Weiwen and Glenn Maguire said Singapore's economy is unlikely to see an export-led lift soon amid wobbly growth in China and poor demand elsewhere in the region.

While the US recovery is firming, it has been led by services rather than goods-producing sectors, contributing to the ongoing "trade recession" in Asia, they noted.

Yesterday's trade data suggests the manufacturing sector, which makes up a fifth of the Singapore economy, is still struggling and will be the main drag on third-quarter growth, economists said.

Factory output data due out next Friday will give a clearer idea of the sector's performance, and also indicate the likelihood of a technical recession in this quarter.

Some economists hope that growth in services and construction will offset the dip in factories and stave off a technical recession.

However, OCBC's Selena Ling said there is a "clear and present danger of a technical recession", given the "perfect storm" of weak manufacturing, the China slowdown and issues like the haze.

The Monetary Authority of Singapore is expected to maintain its stance of a modest and gradual appreciation of the Singapore dollar when it meets next month, but more lacklustre data in the coming weeks could tip the balance towards it easing policy, said Credit Suisse economist Michael Wan.

Citi economist Kit Wei Zheng "senses policymakers do not see an urgency to move".

Among other reasons, they remain confident that growth will be relatively robust next year, and inflation will pick up as a result of the tight labour market driving up salaries, he added.

Correction: An earlier version of the story said "electronics shipments slid 2.7 per cent after a 2.5 per cent fall in July". It should be a 2.5 per cent rise in July. We are sorry for the error.

A version of this article appeared in the print edition of The Straits Times on September 18, 2015, with the headline 'Export slump in August worse than expected'. Print Edition | Subscribe