2.2% Nodx growth here beats forecast

WIN SOME, LOSE SOME: Shipments of electronic products dropped last month, due to weaker demand for integrated circuits and PC parts. This was offset by increases in non-electronic exports and pharmaceuticals.


    May 19, 2015

    2.2% Nodx growth here beats forecast

    EXPORTS recorded another month of surprise growth last month, with non-electronics shipments offsetting the weaker performance of electronic products.

    Non-oil domestic exports (Nodx) grew 2.2 per cent last month over the same month last year, beating the market consensus of a 5 per cent drop.

    The increase follows the 18.5 per cent surge recorded in March, which also caught market-watchers by surprise.

    Last month's growth may provide some momentum for economic expansion in the second quarter, but some economists warned that the outlook is still uncertain due to electronics' structural decline and weak external demand.

    Shipments of electronic products fell back last month, declining 3.8 per cent year on year due to weaker demand for integrated circuits and PC parts.

    This was offset by a 4.7 per cent increase in non-electronic exports, notably vessel structures, which surged 3,566.7 per cent, and pharmaceuticals, up by 7.5 per cent.

    "Looking ahead, we continue to expect Singapore to benefit from the broader cyclical pickup - helped by lower oil prices - which should feed through stronger global demand," Barclays economist Leong Wai Ho said yesterday.

    HSBC economist Joseph Incalcaterra is similarly upbeat, saying: "The better-than-expected Nodx data imply that growth may hold up better than expected in the second quarter. Our forecast is 2.6 per cent growth."

    The economy expanded by 2.1 per cent in the first quarter, according to official advance estimates.

    UOB is forecasting 2.9 per cent second-quarter expansion, but economist Francis Tan cautioned that pharmaceutical and marine engineering shipments are volatile by nature, and may not support consistent growth in the coming months.

    The persistent weakness of electronics manufacturing - which is around one-third of Singapore's total output - also means that headwinds remain.

    "We still maintain our 2015 Nodx forecast of a 1 per cent contraction as we continue to see a slowdown in PC-related exports," Mr Tan added.

    There is also uncertainty on the strength of external demand. Last month, shipments to only two of Singapore's top 10 markets - South Korea and the European Union - recorded growth.

    "Notably, Nodx slid back into decline for key markets like the United States, China, Japan, Malaysia and Indonesia. We would not hold our breath for a Nodx pickup in the second quarter just yet, even with the low base in May and June 2014," OCBC economist Selena Ling warned.

    Last month's Nodx figures are the latest in a string of economic data painting an uncertain economic picture. Earlier this month, the purchasing managers' index came in at 49.4, the fifth straight month of contraction in the manufacturing sector.

    Singapore is also feeling the pinch from China's slowdown, while the US recorded only 0.2 per cent growth in the first quarter.

    But the 19-member euro area is showing signs of recovery after recording 1 per cent growth in the first quarter. This is one good reason to expect better times, Mr Leong said.

    "The turnaround in Europe should augment the recovery in the US, in turn leading to stronger demand for Singapore's swing electronics producers."