Technical recession possible as non-oil exports slide 12%

Latest numbers worse than expected as Singapore trade outlook remains cloudy

Economists warned the outlook for trade remains cloudy.
Economists warned the outlook for trade remains cloudy.PHOTO: ST FILE

Singapore's exporters suffered yet another bleak month in October as a hoped-for lift towards the end of the year failed to materialise.

Economists warned the outlook for trade remains cloudy, and the latest numbers raise the spectre of a technical recession for Singapore's small, open economy this year.

Non-oil domestic exports (Nodx) sank 12 per cent last month over a year earlier, substantially worse than economists' expectations of a 3 per cent slide.

Much of last month's sharp decline was attributed to the volatile pharmaceuticals sector and might be a one-off.

But trade-dependent sectors, such as manufacturing, have already been hit hard by the lacklustre global outlook and there appear to be few prospects for an upturn.

The numbers released yesterday by trade agency IE Singapore were the latest in a recent spate of depressing economic data.

Advance estimates showed the economy shrank 4.1 per cent in the July-to-September period compared with the previous quarter - the biggest slump since 2012. Finalised numbers will be released next Thursday.

Another quarter of contraction would push the Republic into a technical recession, defined as two consecutive quarters of decline in economic output.

Both electronic and non-electronic shipments weighed on last month's trade numbers.

Electronic Nodx shrank 6 per cent over the same month last year, largely owing to declines in shipments of integrated circuits, disk drives and telecommunications equipment.

Non-electronic Nodx slid 14.6 per cent, led by a 47 per cent plunge in pharma exports.

"While pharma might be dismissed as a one-off factor, the dismal Nodx print, if it persists, raises the odds of a technical recession for trade-dependent economy Singapore," said ANZ economist Ng Weiwen.

Shipments to most of Singapore's top 10 markets - except Taiwan, Hong Kong and South Korea - contracted last month. Exports to China - the Republic's largest trading partner - fell for the 16th straight month.

The latest data "paints a picture of continued weakness", which might be further compounded by uncertainties over the impact of a Trump presidency, noted Citi economist Kit Wei Zheng.

Mr Sam Chee Wah, general manager of precision engineering company Feinmetall Singapore, said there has been a steep 20 to 30 per cent drop-off in orders since last month.

This is partly due to activity slowing in anticipation of the upcoming festive season and an early Chinese New Year in January.

"This could be a seasonal thing, but people are also holding back on spending in general. This slow period will definitely roll over into January. Hopefully by mid-February, things will pick up," he added.

A version of this article appeared in the print edition of The Straits Times on November 18, 2016, with the headline 'Technical recession possible as non-oil exports slide 12%'. Subscribe