Singapore exports shrink in May in second straight month

SINGAPORE — Non-oil domestic exports (Nodx) decreased by 1.2 per cent last month, following the 0.8 per cent contraction in April, which ended five months of growth since November, according to data by trade agency International Enterprise Singapore.

The decline in non-electronic exports outweighed the growth in electronic exports which continued to expand for the seventh straight month.

Analysts had mixed views on the continued decline in exports. While there were some who felt that the markets were adjusting to the high levels of export growth in the first quarter, others saw it as a clear sign that the export rally is losing steam.

Noting that the May 2016 base was relatively high at 11.6 per cent year-on-year growth, vis-à-vis April 2016 at minus 7.9 per cent year-on-year, Ms Selena Ling, head of treasury research and strategy, OCBC Bank, said the two straight months of Nodx declines is not an immediate cause of concern.

Some "normalisation" is to be anticipated as "Nodx growth is coming off a very strong first quarter" and the first five months of export growth was already 8.8 per cent year-on-year, said Ms Ling in an emailed statement.

Shipments of electronic products expanded by 23.3 per cent in May, following the 4.8 per cent increase in the previous month. External demand for personal computers jumped by 64.7 per cent, followed by integrated circuits (31.2 per cent) and PC parts (26.2 per cent).

The contraction of exports of non-electronic products by 9.0 per cent last month, after the 2.9 per cent decline the previous month, however outweighed the growth in electronic shipments. Notably, civil engineering equipment parts slumped by 92.5 per cent, followed by a fall in non-monetary gold (24.6 per cent) and a decline in pharmaceuticals (14.2 per cent).

"The latest Purchasing Managers' Index surveys pointed to weakening momentum in the manufacturing sector, with the decline in new export sales gaining speed," said Mr Bernard Aw, an economist at IHS Markit.

In the latest quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore, economists moderated their forecast for Nodx this year to 5.6 per cent, down from the previous forecast of 6.1 per cent.

Mr Benjamin Shatil, regional Asia economist at JPMorgan predicts the Singapore tech sector will soften this quarter, with the next cycle upswing to arrive in the third quarter "on the back of upcoming mobile phone product launches that should bolster regional tech demand".

Nodx to the top 10 markets, except Hong Kong, rose in May, with growth led by China, South Korea and the European Union.

Shipments to China expanded by 36.4 per cent, following the previous month's growth of 10.9 per cent, led by demand for non-monetary gold (139.8 per cent), integrated circuits (62.6 per cent) and petrochemicals (35.2 per cent).

Nodx growth to the EU recovered from minus 36 per cent in April to 16.2 per cent in May, while exports to Japan rose from minus 2.3 per cent in April to grow by 22.8 per cent in May. Shipments to the United States similarly recovered from minus 9.6 per cent in April to a rise of 1.7 per cent in May.

Exports to emerging markets increased slightly by 1.1 per cent, mainly due to Latin America, South Asia and the Eastern and Southern Europe (non-EU).

DBS senior economist Mr Irvin Seah said: "While one can argue that the decline in the headline Nodx figure is due to non-electronics exports' high base, we see it as another clear sign that the export rally is losing steam."

"The only silver lining is that Nodx rose by 8.1 per cent compared to the previous month. But this is after a 9 per cent decline previously. Such tepid movements can be expected in the coming months before a more pronounced downward trend in the later part of the year."

He warned that tighter credit conditions and stiffer regulations on the property market in China could weigh on consumer sentiments and indirectly on Singapore's exports going forward.