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Singapore exports rebound in Feb, but economists not cheering yet
ECONOMISTS cautioned on Monday that Singapore’s exports are not out of the woods yet, even as shipments defied expectations to rebound in February after three straight months of decline.
Last month’s positive export figures was mostly due to a favourable base effect, and not a signal that the worst is over on the trade front, they said.
Singapore’s non-oil domestic exports (Nodx) swung back into the black in February with a surprise growth of 4.9 per cent, reversing from a 10.1 per cent fall in January, which was the biggest drop since October 2016. This also comes in above economist projections of a 1.6 per cent contraction.
On a month-on-month seasonally adjusted basis, Nodx expanded by a whopping 16 per cent in February after the previous month’s 5.7 per cent decline.
OCBC economist Selena Ling pointed out that February’s positive print was largely attributable to a low base last year due to the timing of the Chinese New Year festive season.
With the recent global growth forecast downgrades and mixed data from China, she said that there is “little evidence to suggest that a turnaround in global demand is round the corner at this juncture”.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye agreed that it is “still too soon” to call February’s showing an inflection point as many global developments remain up in the air.
“A trade recovery hinges on the US and China reaching a trade deal, where the timing of a possible deal has now been delayed to June,” the duo wrote in a report.
Economists are also wary about the longevity of this upturn as shipments were buoyed by more volatile industries that might not hold up in the long run.
Last month’s exports were underpinned by non-electronic product shipments, which grew by 9.4 per cent compared to the 7.9 per cent decrease in January. Non-monetary gold, pharmaceuticals and food preparations did the heavy lifting.
Notably, non-monetary gold – which refers to gold not held as reserve assets by central banks – and pharmaceuticals tend to follow their own industry cycles and are hence more difficult to predict.
Looking ahead, UOB economist Barnabas Gan noted that non-electronic exports are heading into a high-base environment, as seen from the strong exports especially in the chemicals and pharmaceutical clusters between April and November 2018.
The heavyweight electronics sector continued to decline, sliding by 8 per cent in February, easing from the 15.9 per cent decrease in the previous month. Disk media products, personal computers, and diodes and transistors contributed the most to the contraction in electronic Nodx.
Mr Gan explained: “This is in line with the fading technology boom seen broadly across many key Asian economies amid a fall in demand for machinery and electronic goods, alongside information and communications equipment.”
In February, Nodx was driven mainly by exports to China, Hong Kong, and the US. Exports to the majority of the top markets increased, except Japan, South Korea, the European Union (EU) and Indonesia.
According to Maybank Kim Eng’s Mr Chua and Ms Lee, there are some early indications of trade and demand diversion from the US-China trade war.
“We are seeing clear signs of rising foreign direct investment in manufacturing across Asean, as companies look to relocate and diversify their production network,” they wrote. “Singapore may benefit from higher manufacturing capacity and exports to the neighbourhood.”
But the duo maintained their view that Singapore’s exports will still remain weak in the first half of 2019, as trade and purchasing managers’ index indicators across the region continue to show a sea of red, especially China, South Korea, and Taiwan.
In addition, Dr Tan Khay Boon, senior lecturer, SIM Global Education added that a “messy Brexit” could also drag down exports to the EU in the near future.
“The turnaround improvement in Nodx exports in Feb 2019 is a welcome respite but the concern is sustainability,” he said. “Even the improvement in exports to China and the US may be short-lived if there is no amicable settlement in their trade disputes.”
Source: https://www.sgsme.sg/news/government/singapore-exports-rebound-feb-economists-not-cheering-yet