Singapore’s non-oil domestic exports weakens 10% in April

By Michelle Chia, Economist, CIMB Research and Economic and Sofea Azahar, Economist, CIMB Research and Economics


HIGHLIGHTS

April 2019 trade

  • NODX plunged 10% in April, on weakness in electronics and non-electronics.
  • Downside risks to Singapore’s GDP growth and inflation outlook have intensified as protracted US-China talks weigh on trade recovery in 2H19.
  • Materialisation of such risks may warrant policy intervention. At this juncture, we expect MAS to maintain the S$NEER parameters in October.

NODX’s contraction persists in April
Singapore’s non-oil domestic exports (NODX) weakened sharply in April (-10.0% yoy vs. – 11.8% yoy in March), missing our forecast of -3.8% yoy, pulled back by weaker exports of non-electronics (-7.9% yoy vs. -7.1% yoy in March) and electronics (-16.3% yoy vs. -26.7% yoy in Mar). The seasonally-adjusted NODX fell 0.6% mom in April (-14.3% mom in March). As a trade bellwether, Singapore’s slump reflected export weakness across the region: China (-3.3% yoy), Indonesia (-13.1% yoy) and South Korea (-2.0% yoy).

High base takes a toll on non-electronics
A higher base in 2018 exacerbated the fall in non-electronics exports in April, a trend that could persist into May. Pharmaceutical, petrochemicals, organic chemical and specialised machinery NODX dropped 46.6%, 13.6%, 47.5% and 22.7% yoy, respectively, in April.

Semiconductor cycle still finding a bottom
Exports of the five major electronic products deteriorated in April (-16.4% yoy vs. -26.5% yoy in March) with waning exports in integrated circuits (ICs, -21.2% yoy), PC parts (-10.3% yoy), disk media products (-31.3% yoy) as well as diodes & transistors (-13.5% yoy). In February, the World Semiconductor Trade Statistics (WSTS) downgraded its outlook on semiconductor sales in 2019 (-3.0% vs. +2.6% previously), and projected sales to pick up moderately in 2020. This was echoed by our semiconductor analyst who expects 2019 to be a down year, with risks amplified by the negative impact of the US-Sino trade tension.

NODX plunges in key markets except the US and Hong Kong
Deliveries to key destinations slipped in April excluding the US and Hong Kong: China (- 5.8% yoy), Japan (-31.1% yoy), the EU (-25.4% yoy), South Korea (-19.8% yoy), Taiwan (-15.8% yoy), Malaysia (-13.6% yoy), Thailand (-12.1% yoy) and Indonesia (-0.3% yoy).

Dimmer signs of recovery on the external front
The recent tariff escalation between the US and China alongside the downturn in the tech industry injects further uncertainty into Singapore’s trade trajectory. China will impose tariffs of 5-25% on US$60bn worth of US imports, effective 1 Jun, in retaliation to US tariff hike on US$200bn of Chinese goods. A public hearing will also be held by the US Trade Representative’s office in Jun on the proposal of further tariff imposition of 25% on US$300bn worth of Chinese imports. Materialisation of retaliatory tariffs would weigh on Singapore’s growth outlook, and may prompt policy intervention. At this juncture, we believe external risks will strengthen the Monetary Authority of Singapore’s (MAS) resolve to maintain current accommodative monetary policy settings in October.

Originally published by CIMB Research and Economics on 17 May 2019.

This article has been edited to reflect its time-sensitivity.