Exports skid, but recovery looks on course

Dip of 5.2% from May partly due to poor showing from volatile pharmaceutical sector

SINGAPORE's non-oil domestic exports (NODX) did an about-turn and tumbled last month. But economists generally maintain that export recovery remains broadly on course.

The latest trade figures released yesterday by International Enterprise (IE) Singapore show that June's NODX fell a seasonally adjusted 5.2 per cent from May - worse than a 1.3 per cent dip tipped by the market and reversing May's 5.3 per cent rise.

Still, HSBC Bank economist Prakriti Sofat notes that NODX for the April-June quarter as a whole jumped 7.6 per cent from Q1, in line with the overall pick-up in the economy.

The Ministry of Trade and Industry reported on Tuesday that Singapore's gross domestic product grew an estimated 20.4 per cent in Q2 from Q1 in seasonally adjusted, annualised terms. This was the first expansion in five quarters.

NODX growth in Q2 came after quarterly drops of 7.3 per cent in Q1 and 12 per cent in Q4 2008.

Ms Sofat blames June's month-on-month dip in NODX partly on a poorer showing by the volatile pharmaceutical sector.

Shipments of pharmaceutical products rose just one per cent last month from a year earlier, after two straight months of 40 per cent-plus year-on-year increases.

But that did not worsen the performance of non-electronic exports as a whole. They slipped 4.6 per cent year-on-year in June - not as bad as May's 5.9 per cent drop.

Electronic shipments fell 21 per cent last month after a 22 per cent slide in May. Overall, NODX was down 11 per cent year-on-year in June. This was in line with expectations of -10.8 per cent and an easing from -12.3 per cent in May and -19.2 per cent in April.

'The pace of decline in June NODX continued to moderate,' Citigroup's Wei Zheng Kit notes. 'Despite fluctuations in monthly data, NODX is likely to continue improving.'

Ms Sofat adds: 'With regional economies expected to increasingly feel the benefits of the massive easing delivered, and with some stabilisation in the developed world as well, Singapore should benefit.'

She sees Asian exports increasing sharply in Q3, lifting Singapore exports.

Barclays Capital Research's Wai Ho Leong also believes that NODX will continue to rise 'on a trend basis' over the next three months, in tandem with production indicators.

But UOB's Chow Penn Nee does not expect a quick rebound and says that 'the sustainability of the pick-up in NODX is questionable'.

'Signs of a turnaround in US consumer spending have not happened yet, what with continuing job cuts and the burgeoning jobless rate,' she says.

Still, the decline in NODX shipments to the US moderated to 5 per cent in June, from about 35 per cent in May and April.

But NODX exports to the European Union - Singapore's biggest market - plunged 36.2 per cent last month, compared with a 9.6 per cent drop in May.

Source: Business Times, 18 July 2009