Intra-Asia trade collapse takes toll on August NODX

Non-oil domestic exports contracted 8.4% y/y in August, weaker than expectations. On a m/m sa basis, exports fell 4.6%, erasing the 2.5% gain in July. The softness was driven by a sharp, 29% y/y contraction in petrochemicals due to earlier-than-usual refinery maintenance schedules, which exacerbated the effect of a further drop in oil prices.

"Despite today's weaker-than-expected print, Singapore is still expected to benefit from the broader external pickup. This is also consistent with the MTI's cautiously optimistic view over the prospects for H2, which cited a gradual, albeit "uneven" pick-up in US and euro area growth, which should offset a weaker growth outlook in China and Asean", says Barclays. 

In any case, a more important determinant for Q3 GDP is the August IP report, which will be released on 25 September. Growth and inflation in Singapore have fallen, but not by enough to trigger further MAS easing. 

The MAS remains firmly focused on the key medium-term core inflation driver,  the tight labour market, while the outcome of the 11 September general election ensures the continuity of current economic policies.

"With a lower potential growth rate, the output gap is likely to be slightly negative this year. As such, we expect no policy change to the SGD NEER policy parameters at the upcoming October MPS", added Barclays.