SINGAPORE — Singapore’s exports engine choked and sputtered in July to its steepest plunge in four months, as orders from all but one of the Republic’s top 10 markets fell, leading some analysts to point to the risk of an economic contraction ahead.

On a year-on-year basis, the non-oil domestic exports (NODX) decreased 10.6 per cent last month, following the 2.4 per cent contraction in June, due to a decline in both electronic and non-electronic shipments, trade agency International Enterprise (IE) Singapore said on Wednesday (Aug 17). The figure was far worse than the median forecast of a 2.5 per cent slump in a Reuters poll, and represents the fifth time exports has shrunk this year.

On a month-on-month seasonally-adjusted basis, NODX decreased by 1.8 per cent, following the previous month’s 13 per cent contraction.

“Indeed, when it rains, it pours,” said DBS senior economist Irvin Seah. “This will add on to the long list of poor data pointing to the risk of an economic contraction ahead. Second-quarter GDP figures have been revised down. The official full-year GDP growth forecast has been lowered. Economic numbers across the region are mostly heading down rather than up. The writing is on the wall. For those maintaining a sanguine view on the near-term outlook on the economy, this should be a wake-up call.”

Last month, the decline was broad-based across electronic and non-electronic products.

Exports of electronics products shrank 12.9 per cent year-on-year, accelerating June’s 1.7 per cent decline, largely due to weaker demand for PCs, parts of ICs and diodes & transistors.

Meanwhile, non-electronics NODX, which was earlier supposed to account for potential upside by IE Singapore, was dragged lower by petrochemicals, civil engineering equipment parts, and specialised machinery, declining 9.5 per cent.

In terms of geography, exports to all of Singapore’s top 10 markets, except the EU 28, fell. The worst performers were China, the US and Indonesia.

Shipments to China, Singapore’s largest export destination, fell 16.6 per cent following the previous month’s 9.9 per cent contraction, while those to the US decreased by 19.1 per cent and Indonesia contracted 22.6 per cent.

“This is a broad-based decline and once again it reflects the downside risk to the growth outlook amid a challenging external environment,” said Mr Seah. “(The) slowdown in China is the main concern but sluggish growth in the US and uncertainties surrounding the Eurozone are not helping. In addition, commodity and energy prices have not recovered. These confluence of factors are essentially pointing in the same direction on growth outlook. And it’s down, not up,” he added. 

Singapore last week cut the top end of its 2016 growth forecast, citing uncertainties arising from the United Kingdom’s exit from the European Union, a weaker global growth outlook and a lacklustre domestic performance. The economy is now expected to expand by between 1 and 2 per cent, narrowing from the previous forecast of 1 to 3 per cent, the Ministry of Trade and Industry said in an update on the Republic’s second-quarter performance, which was also revised down to 2.1 per cent year-on-year, from 2.2 per cent previously.

IE Singapore signalled last week that non-electronic products could help mitigate the protracted slump the Republic has faced in sales of locally produced goods to overseas markets, and revised its 2016 exports forecast to reflect a narrower decline of between 3 and 4 per cent this year, a slight improvement from its previous forecast of a 3 to 5 per cent decline.

UOB economist Francis Tan acknowledged July’s “dismal” exports data, but said that a second half pick up was still possible as global trading activities seem to be picking up some pace, and Singapore’s manufacturing activities recently may bode well for exports in the coming months.

“Although today’s July NODX data was dismal, it does not change our outlook of the potential pick-up in global trading activities in the months ahead. We agree that it will be difficult to project accurately the eventual timing of the positive spillovers for Singapore’s exports as it will entail even more variables (such as domestic cost competitiveness), and not just stronger global trading flows. That said, we maintain our full-year NODX growth forecast of a contraction of 2.5 per cent,” he said.

Similarly, Ms Selena Ling, Head of Treasury Research & Strategy at OCBC Bank said: “While this July NODX print heralds a very soft start to the third quarter, we do not automatically interpret this as a fresh and significant deterioration in economic prospects from a week ago … Our full-year 2016 GDP and NODX growth forecasts remain intact at 1.8 per cent and -4 per cent, respectively.