SINGAPORE – Singapore’s key exports fell for a ninth straight month in June, with analysts cautious on prospects of a recovery towards the end of 2023.
Non-oil domestic exports (Nodx) shrank 15.5 per cent year on year in June, a steeper decline following a revised 14.8 per cent fall in May, according to data from Enterprise Singapore (EnterpriseSG) on Monday.
DBS Bank economist Chua Han Teng said the fall continues to reflect the challenge trade-oriented sectors such as manufacturing face amid headwinds in the global environment.
The drop was slightly less than the 15.6 per cent fall forecast by analysts in a Bloomberg poll.
In real terms after adjusting for inflation, Nodx decreased by 9 per cent, following a 7.8 per cent fall in May, EnterpriseSG said.
Nodx has already slumped 14.8 per cent for the first six months of 2023, noted OCBC Bank chief economist Selena Ling.
“It’s the weakest first-half performance since the first half of 2009, when Nodx sank 20.3 per cent year on year,” she said.
Non-electronics shipments shrank 15.4 per cent in June, a sharper contraction than the 10.7 per cent decline in May.
Petrochemicals (minus 34 per cent) and primary chemicals (minus 61.8 per cent) declined from the high base a year ago in June 2022.
Pharmaceuticals shipments, meanwhile, slid 29.5 per cent in June after falling 14 per cent in May.
Electronics shipments posted a smaller decline in June, falling by 15.9 per cent year on year, after contracting 27.2 per cent in May.
Integrated circuits (ICs), personal computers and parts of personal computers contributed the most to the drop in electronics exports, with the last segment seeing the sharpest fall of 44.8 per cent.
ANZ head of Asia research Khoon Goh said despite signs that the global semiconductor cycle may have bottomed out and is starting to pick up, the improvement has yet to be reflected in Singapore’s exports of ICs, which fell another 31.8 per cent year on year in June.
DBS’ Mr Chua said that “there are still headwinds from further inventory destocking and lingering geopolitical tensions”, so he will prefer to watch for a few more months to be sure of a gradual recovery in the second half of the year.
On a seasonally adjusted month-on-month basis, Nodx grew 5.4 per cent in June, reversing from May’s 14.6 per cent decline.
June’s increase came on the back of the drop in May, Mr Goh said, adding that the month-on-month figures are very volatile.
Breaking down by shipments to Singapore’s top 10 markets, local exports to China continued to recover, rising another 3.1 per cent in June. This was the second straight month of increase since June 2022, snapping 10 months of contraction.
China is the second-biggest export market for Singapore, with a 15.8 per cent share of Nodx in the January-to-June period.
Mr Chua said DBS remains cautious on whether China will provide a significant boost to Singapore’s exports in the coming months because China’s post-pandemic recovery remains bumpy.
OCBC’s Ms Ling also cautioned that the recovery of exports to China may not be sustainable.
“China’s economic indicators have shown waning growth momentum in recent months, which, coupled with very targeted and calibrated policy stimulus, have contributed to weak market sentiments,” she said.
Indeed, data on Monday showed that the Chinese economy grew 6.3 per cent year on year in the second quarter, missing expectations for growth of 7.3 per cent.
Singapore’s shipments to the United States – its biggest export market – dipped 1.8 per cent in June, ending four consecutive months of positive growth.
Shipments to the European Union, the third-biggest export market, fell again in June.
Ms Ling said shipments to both the US and EU were weighed down by weakness in non-electronics demand.
Intra-regional trade with South-east Asian countries – Malaysia, Indonesia and Thailand – also posted sharper declines in June.
ANZ’s Mr Goh said year-on-year Nodx growth in the next few months will remain negative due to the higher base from last year. Thereafter, he expects the level of exports to stabilise and start to improve.
“The US economy is showing resilience, and growth in some parts of Asia have been robust, particularly India and Indonesia. These should start to be reflected in the export numbers later in the year,” he said.
Ms Ling said she remains cautious on the growth outlook in the third quarter because of the “protracted soft patch in manufacturing, especially electronics”.
But there should be some improvement in the services sector, especially from the hospitality-related industries, she added.
For the whole of 2023, OCBC expects Nodx to contract by up to 10 per cent.
“The external growth environment remains soft and demand conditions for Singapore’s key export markets in the US and Europe are still facing headwinds from hawkish central banks,” said Ms Ling.
