Singapore exports snap nine months of contraction but recovery still cloudy

18-Jan-2020 Intellasia | StraitsTimes | 6:02 AM Print This Post

Singapore exports staged a surprise recovery in December, snapping a nine-month slump thanks to a surge in pharmaceutical shipments, but economists see a gradual and tepid recovery ahead.

Overall shipments of non-oil domestic exports (Nodx) climbed 2.4 per cent from a year earlier last month, following a 5.9 per cent drop in November, Enterprise Singapore data showed on Friday (January 17).

The climb beat a forecast of a 1 per cent year-on-year fall in a Bloomberg poll of analysts.

Non-electronics exports expanded 11.5 per cent on the year, building on last month’s increase of 1.2 per cent. The surge was led by gains in non-monetary gold (+127.8 per cent), pharmaceuticals (+34.7 per cent) and specialised machinery (+29.7 per cent).

But shipments from the key electronics sector remained mired in a downturn, plunging 21.3 per cent from a year ago. Though slightly better than the 23.3 per cent slide in November, it was far below the 13.9 per cent drop expected by analysts.

Top decliners in the sector included integrated circuits, personal computers and their parts.

The increase in shipments in December were mainly to China, Taiwan and the United States.

On a seasonally adjusted month-on-month basis, Nodx increased 1.1 per cent in December 2019, extending the previous month’s 5.8 per cent growth.

DBS economist, Irvin Seah, said the exports recovery is expected to be lukewarm for another few months as uncertainty over the US-China trade dispute persists and tariffs remain in place for as much as $360 billion (S$484 billion) worth of Chinese exports to the US.

“The phase one agreement is just the first step towards a de-escalation of trade hostilities between the US and China. There’s no certainty of this agreement’s success and there are many issues that remain unresolved,” he said.

Seah also believes the global recovery in semiconductor shipments is not strong enough as yet to lift Singapore’s electronic sector out of its slump.

“Singapore’s electronic exports may begin to show signs of recovery only in the second quarter of this year,” he said.

“This could be partly due to the lag effect and competition from emerging regional players. Nevertheless, electronics restocking is in progress globally due to an overcutting of inventory levels on the back of the trade war,” said Seah.

New demand for parts and components for 5G implementation across the world, as well as broader usage of new technologies such as the Internet of Things, artificial intelligence and driverless vehicles could also provide some impetus for electronics manufacturers in the quarters ahead, he added.

The government said in November it expects exports to pick up this year, with Nodx tipped to grow in the range of zero to 2 per cent on the back of a gradual recovery in electronics. For full-year 2019, it expects Nodx to contract by 9.5 per cent to 10 per cent.

According to calculations by Nomura International, Nodx for full-year 2019 shrank 9.2 per cent compared with a 4.2 per cent expansion in 2018. However on a quarterly basis, the year-on-year decline in the last three months was 5.7 per cent compared with 9.6 per cent in the third quarter.

The bank’s analyst Euben Paracuelles said the increase in December non-oil shipments was mainly driven by the volatile pharmaceutical exports, which swung sharply to rise 34.7 per cent from a 16.3 per cent decline in November due to a low base effect.

He said despite the weak performance of the electronics sector, Nomura will maintain its 2020 GDP growth forecast of 1.3 per cent, which would mark an improvement from 0.7 percent in 2019.

“We think the drag from the tech sector is set to subside amid signs of a bottoming of the tech cycle. In addition, we expect the fiscal stance to turn significantly expansionary ahead of the elections, which we expect to be called later in the year,” said Paracuelles.

The trade war between the United States and China and the cyclical downturn in the global electronics sector has weighed down Singapore’s economic growth. Flash data showed gross domestic product expanded at 0.7 per cent last year, its slowest pace in a decade. But Singapore’s semiconductor industry expects the adoption of new technologies such as 5G will help fuel growth in the near future.

Overall, total trade edged up 0.7 per cent in December from a year ago, reversing from the 5.9 per cent fall in the previous month. This came on the back of a rebound in total exports which rose 3.6 per cent rise, while total imports declined by a smaller margin of 2.3 per cent.

“Singapore’s electronic exports may begin to show signs of recovery only in the second quarter of this year,” he said.

The trade war between the United States and China and the cyclical downturn in the global electronics sector has weighed down Singapore’s economic growth.

Flash data showed gross domestic product expanded at 0.7 per cent last year, its slowest pace in a decade. But Singapore’s semiconductor industry expects the adoption of new technologies such as 5G will help fuel growth in the near future.

Overall, total trade edged up 0.7 per cent in December, reversing from the 5.9 per cent fall in the previous month. This came on the back of a rebound in total exports which rose 3.6 per cent, while total imports declined by a smaller margin of 2.3 per cent.

The government said in November it expects exports to pick up this year, with Nodx tipped to grow in the range of zero to 2 per cent on the back of a gradual recovery in electronics. For full-year 2019, Nodx is expected to contract by 9.5 per cent to 10 per cent.

https://www.straitstimes.com/business/economy/singapore-non-oil-exports-break-9-month-slump-with-24-rise-in-december

 


Category: Singapore

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