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Exports jump in May, but outlook still cloudy

SINGAPORE — The Republic’s non-oil domestic exports (NODX) confounded expectations with a surprise expansion last month, boosted by shipments of non-electronic items such as prefabricated buildings, non-monetary gold and pharmaceuticals, but economists say the outlook remains cloudy as the outperformance was due to a few narrow segments and is unlikely to be sustained in the coming months.

 

SINGAPORE — The Republic’s non-oil domestic exports (NODX) confounded expectations with a surprise expansion last month, boosted by shipments of non-electronic items such as prefabricated buildings, non-monetary gold and pharmaceuticals, but economists say the outlook remains cloudy as the outperformance was due to a few narrow segments and is unlikely to be sustained in the coming months.

NODX jumped 11.6 per cent in May from the same month a year earlier, trade agency International Enterprise Singapore said on Friday (June 17), rebounding from the 7.9 per cent decline in April and beating the 2.3 per cent drop forecast by economists in a Reuters poll. 

The strong performance comes less than a month after IE Singapore slashed the official NODX forecast for this year to a 3 to 5 per cent contraction from the earlier zero to 2 per cent expansion, citing a weakening global economic outlook.

Shipments of non-electronic products expanded by 19 per cent last month, turning around from the 8.1 per cent contraction in the previous month, while shipments of electronic products contracted by 6 per cent, following the 7.4 per cent fall in the previous month.

“Although the May surge in NODX was the best seen since the 18.1 per cent increase in March 2015, we hesitate to jump for joy and call for a turnaround in the exports outlook as this outperformance was really based on a few narrow segments,” said UOB economist Alvin Liew, who forecast NODX to resume its decline this month.

He noted that the main contributor to May’s stellar performance was exports of prefabricated buildings of about S$1.7 billion, nearly all of which went to Norway. 

“Between July 2013 and April 2016, the monthly exports to Norway did not exceed S$80 million in any of the months, suggesting that we are likely to see exports to Norway dropping back to normal levels below S$80 million in the subsequent months after May,” he said.

Exports of non-monetary gold – or gold not held as reserves by the authorities - was helped by the uncertain global economic environment. Mr Liew noted that the price of gold has risen 20.6 per cent in the year to date, making it one of the best performing assets in 2016.

“Even though the domestic consumption of gold is very small, Singapore is a big regional player in the gold trade. The high gold price could have led to gold dishoarding, incentivizing sellers to come out to take advantage of the surge in gold prices while demand was also likely to be robust in May ahead of key geo-political risk event in summer - the Brexit vote on June 23,” he said. 

OCBC’s head of treasury research and strategy Selena Ling said: “It is too early to conclude that the May NODX print heralds a strong turnaround export engine story that will last beyond a month or two and/or shift the headline second-quarter gross domestic product growth for that matter.” She pointed out that other than the spike in non-electronic shipments, the other contributing factor to the jump in NODX for May was the low base last year. 

“For the top 10 NODX markets, the positive turnaround seen in May were due to three countries - Taiwan, United States and Malaysia.  The other seven of the top 10 NODX markets still registered declines in May,” she said.

Shipments to China, Singapore’s largest export destination, slumped for the 11th straight month with a 10.1 per cent decline, the IE data showed, accelerating from the previous month’s 7.4 per cent contraction as shipments for both electronics and non-electronic products shrank.

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