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S’pore’s Nodx growth slows sharply in June amid trade war concerns

SINGAPORE — While the trade war between the United States and the China begun in earnest this month — with tariffs imposed by both sides against each other taking effect — the rest of the world, including Singapore, were already feeling the impact of the fallout earlier.

SINGAPORE — While the trade war between the United States and the China begun in earnest this month — with tariffs imposed by both sides against each other taking effect — the rest of the world, including Singapore, were already feeling the impact of the fallout earlier.

Data from Enterprise Singapore showed on Tuesday (July 17) that the Republic's non-oil domestic exports (Nodx) rose a mere 1.1 per cent in June from a year earlier, slowing significantly from a 15.5 per cent rise the month before.

This was also less than the 7.6 per cent rise predicted in a Reuters poll. Exports to the majority of Singapore's top 10 markets declined in June, except the US, Indonesia, Hong Kong and the European Union.

With shipments to China — which is Singapore's largest export market — falling by 15.8 per cent, analysts said the Republic is starting to feel the trickle-down effects of the US-China trade spat, and warned of a murkier outlook for the external trade environment.

"It is a little too early to tell but it is possible that the trade war concerns might have weighed on demand from China for goods," said Mr Jameel Ahmad, global head of currency strategy and market research at FXTM.

Noting the "underlying concerns" about the significantly slower pace of growth, he reiterated that the region, as a whole, is "very reliant on global trade and these trade war concerns can create headwinds" for export-reliant economies.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, also cited the trade disputes which, along with moderated growth in China, are likely to have an adverse impact on Singapore's exports in the months ahead.

June's Nodx figures "reinforced the concern that the external trade environment is increasingly challenging", he noted.

Singapore has to depend more on domestic demand instead of export for growth, he said.

Maybank Kim Eng senior economist Chua Hak Bin said the "much weaker than expected" Nodx data was a "warning sign" that the trade war is starting to impact investments and sentiments.

In the coming months, this might potentially translate into "much weaker" manufacturing numbers, said Dr Chua.

And things could get uglier, the experts noted.

The first round of US tariffs on US$34 billion of Chinese goods was launched on July 6.

CIMB economist Song Seng Wun said the "first real impact" will only be truly be felt in the coming months, and show up in this month's manufacturing and trade data.

On the possible impact, Mr Song said it might affect the number of orders for goods and production in factories, for instance.

If countries decide to retaliate by implementing tariffs, the impact could "escalate" and hurt global trade, and Singapore may be affected in the fall-out, he added.

UOB economist Francis Tan felt that the June data was more a reflection of a "general slowing down", as electronics exports had expanded too quickly last year.

Nevertheless, going forward, the trade war might further "aggravate" the current slowdown which Singapore is seeing, he said.

"Since Singapore exports a lot of electronics, that portion would suffer quite a bit, as electronics is needed in a lot of products which China is selling… This would impact us quite substantially," he said.

On a seasonally adjusted month-on-month basis, exports fell 10.8 per cent in June after growing 10.3 per cent the month before. The poll tipped a contraction of 8.0 per cent.

Pharmaceutical exports grew 19.1 per cent in June from the year earlier, slowing from 32.1 per cent growth in May.

Electronic shipment contracted 7.9 per cent in June from a year earlier after declining 7.8 per cent in May.

DBS senior economist Irvin Seah reiterated: "The bigger worry is the decline of 10.8 per cent… compared to the previous month. While this is partly attributed to the pullback in non-electronics exports, the underlying trend is heading downwards."

He expects "even slower" economic growth in the third quarter. "Although the economy had held up well in the second quarter, the impact from the slowdown on the external front will only manifest in the third quarter figures," he said.

"Coupled that with the effects of trade protectionism and tighter liquidity conditions, economic outlook in the longer horizon is turning increasingly cloudy." ADDITIONAL REPORTING BY TOH EE MING

 

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