Surprise rebound in non-oil exports

But experts split over whether economy has turned a corner with surge in electronics sector

Demand from seven of Singapore's top 10 Nodx markets rose compared with last year.
Demand from seven of Singapore's top 10 Nodx markets rose compared with last year.ST PHOTO: NEO XIAOBIN

Exports staged a surprise rebound last month on the back of surging electronics shipments after months of contraction, although experts are split over whether the economy has turned a corner.

Non-oil domestic exports (Nodx) rose 4.7 per cent year-on-year in June - more than double the consensus forecast of a 2 per cent growth and a major improvement over the 0.3 per cent decline recorded in May.

The electronics sector was the key driver of the recovery, said International Enterprise Singapore yesterday. After two months of contraction, exports from the industry - which accounts for a third of Singapore's manufacturing - grew 7.6 per cent year-on-year. Within the segment, personal computer exports rocketed 69.6 per cent while shipments of integrated circuits shot up 10.8 per cent.

Barclays senior economist Leong Wai Ho saw these as signs of further recovery for a struggling industry.

"This is in line with our view that electronics would see a cyclical rebound in the coming months as external demand improves, supported by continued strength in the US and a recovering Europe," he said.

The electronics purchasing managers' index standing at 50.3 in June - a five-month high - further confirmed his view, Mr Leong said, "and we expect the recovery in the sector to continue in the second half this year".

The non-electronics Nodx was also up, with exports expanding 3.6 per cent year-on-year last month, higher than the 0.6 per cent growth in May. This was despite a 5.2 per cent year-on-year decline in pharmaceutical exports and a 2 per cent drop in petrochemical shipments, which was offset by higher volume in electrical machinery and non-electric engines and motors.

Demand from seven of Singapore's top 10 Nodx markets was up compared with last year.

Exports to the US grew 32.2 per cent, were up 12.2 per cent to China and grew 4.3 per cent to the euro zone. Shipments to Malaysia, Indonesia and Taiwan were down.

'Positive signs' for economic growth

June's better-than-expected figures may raise second-quarter economic growth, HSBC economist Joseph Incalcaterra noted.

The latest official advance estimates tip that overall gross domestic product (GDP) contracted 4.6 per cent in the second quarter over the previous quarter, due to a 14 per cent fall in manufacturing from the first quarter of this year.

But June's Nodx data may lead to an upward revision to the final second-quarter GDP reading, depending on how strong last month's industrial production was, Mr Incalcaterra said, adding that there were other positive signs for the economy.

"Better-than-expected retail sales data from May and expectations of a further retail pick-up alongside the Great Singapore Sale suggest that the services sector saw a pick-up in momentum at the end of the second quarter," he added.

Others are less optimistic, with DBS economist Irvin Seah noting that Nodx actually declined from May to June as headwinds still persist for manufacturing.

"The month-on-month decline of 2.4 per cent is a concern. Note that this follows a 3.3 per cent slide in the previous month," he said.

"Beyond the rising external headwinds and global uncertainties, Singapore manufacturers are also struggling with the triple-whammy of higher business costs, labour crunch and a strong currency."

As manufacturers at home struggle, regional competitors have caught up. Vietnam will overtake Singapore to become Asia's fifth-biggest electronics exporter in the next two years, he warned.

A version of this article appeared in the print edition of The Straits Times on July 17, 2015, with the headline 'Surprise rebound in non-oil exports'. Print Edition | Subscribe