Electronic exports in surprise comeback

Singapore

AFTER 28 straight months of decline, Singapore's domestic shipments of electronic products made a surprise turnaround in December to help push overall non-oil domestic exports (NODX) up for a second consecutive month.

The NODX rose 2.3 per cent year-on-year last month after a revised 0.8 per cent increase in November, backed by a 0.4 per cent rise in the electronic NODX and a 3.2 per cent jump in the non-electronic NODX, according to figures released on Friday by trade promotion agency International Enterprise Singapore.

The NODX growth was unexpected - private-sector economists were looking at a 2.2 per cent fall - and came even though the non-electronic NODX's increase was only nearly half of what it was in November.

But the electronic NODX's rebound in December, though small, came after a steep 10.2 per cent drop in the previous month.

"The surprise improvement in electronic NODX was due mainly to a 12.6 per cent growth in ICs (integrated circuits, which make up 60 per cent of total electronic NODX), offsetting the persistent weakness in PC-related exports such as parts of PCs, parts of ICs," says Alvin Liew, an economist at UOB.

Month on month, the electronic NODX also came to the rescue in supporting the NODX to increase by a seasonally-adjusted 0.1 per cent in December, when the non-electronic NODX declined.

Though the sequential increase seemed tiny, especially when compared to the 2.1 per cent rise in November, it was still better than the 1.6 per cent drop economists were looking at - and it was the third monthly expansion in a row.

The better-than-expected growth in December brought the NODX's full-year decline to 0.7 per cent, milder than the official forecast of a 1-1.5 per cent shrinkage, according to OCBC Bank's Selena Ling.

But economists cautioned against rushing to celebrate. "Electronic exports resurfaced at +0.4 per cent in December, but (it) is unclear at this juncture if the improvement is sustainable into the first quarter this year given that it was not driven by stronger external demand out of a market like the US," Ms Ling says.

Shipments to the US slipped last month, along with those to China, Japan and Indonesia, according to IE Singapore. They rose in the rest of Singapore's top 10 markets, with South Korea, Malaysia and the EU the top three contributors.

"Overall, December's numbers continue to suggest that a strong manufacturing recovery remains elusive," says Citibank's Kit Wei Zheng. "Despite NODX surprising on the upside, this comes from depressed levels with fourth-quarter seasonally-adjusted NODX still 1.3 per cent and 3.2 per cent below third-quarter levels, in nominal and real terms respectively."

Chua Hak Bin of Bank of America Merrill Lynch says the outlook is still far from rosy. "Intensity of import demand in several major export destinations like the EU, Japan and China remains sluggish," he says. "Singapore is also not yet benefiting from strong growth in the US."

UOB's Mr Liew says the turnaround in the electronic NODX "may easily falter and resume its decline while petrochemicals could remain under pressure with the oil price weakness persisting at least into the first quarter of 2015".

The latest trade data indicates that the plunge in global oil prices is already weighing on Singapore's overall export performance.

"In spite of the stronger expansion in both NODX and non-oil re-exports (+8.7 per cent) in December, total exports continued to contract (-0.7 per cent), hurt by oil shipments," Mr Chua of Bank of America Merrill Lynch notes.

Domestic exports of oil tumbled by a sharper 22 per cent in December, while oil re-exports sank 27 per cent as crude oil price continued to slide during the month.