Singapore’s NODX falls less than market expectations; outlook soft for remaining year, says OCBC Bank

Singapore’s non-oil domestic exports (NODX) for the month of July declined 11.2 percent y/y (+3.7 percent m/m sa), slightly better than OCBC Bank’s forecast for -15.2 percent y/y (+3.4 percent m/m sa), according to the latest research report from OCBC Bank.

However, this is the fifth consecutive month of double-digit y/y decline in NODX growth as both electronics and non-electronics exports continued to contract amid slowing global growth prospects, US-China trade and tech war and China’s growth deceleration. 

The main drag was electronics exports which contracted 24.2 percent y/y, which was a slight improvement from June’s -31.9 percent but marked the sixth consecutive month of double-digit declines. The electronics weakness was again concentrated in PCs (-35.5 percent), disk media products (-35.3 percent y/y), and ICs (-24.2 percent y/y).

Non-electronics exports also registered its sixth straight month of contraction at -6.6 percent in July, albeit this is also an improvement from the -12.6 percent seen in June. Pharmaceuticals exports shrank by a more severe 32.7 percent y/y (June: -11.3 percent y/y) and specialised machinery exports also plunged 31.3 percent amid the ongoing trade war, while the drop in petrochemicals exports eased from -16.7 percent y/y to -9.4 percent y/y.

NODX to US continued to expand by a stronger 12.3 percent y/y in July, up from 1.5 percent y/y in June. For the year-to-date, the US market is the only one in Singapore’s top 10 NODX markets to see positive y/y growth, but remains insufficient to buffer the NODX declines in the other major markets.  The driver for NODX to the US market came from non-electronics exports (+18.3 percent y/y) whilst electronics exports remained weak (-8.8 percent y/y).

Meanwhile, the NODX drop to China market also eased from 15.8 percent y/y in June to 5.0 percent y/y in July, as electronics and non-electronics exports fell by a less severe 13.4 percent y/y and 2.6 percent y/y respectively compared to June’s -36.0 percent y/y and -11.4 percent y/y prints. 

"NODX has already contracted 10.7 percent y/y for the first seven months of this year and we expect NODX growth to remain weak around -8.1 percent y/y to round up the full-year 2019 NODX growth to -9.7 percent y/y. If this materialises, it will be the worst full-year of NODX performance since 2009 when NODX fell 10.5 percent y/y," the report further commented.

Meanwhile, the macro headwinds remain intact for now and include the ongoing US-China trade war stalemate (with China now hinting of retaliation to Trump’s move to implement 10 percent tariffs on USD300 billion of Chinese imports between September 1 and December 15), heightened uncertainties over the tech cycle (including 5G/Huawei and Japan-South Korea’s trade spat), the rising risk of a no-deal Brexit and persistent protests in Hong Kong (which prompted the HK government to recently slash its 2019 growth forecast from 2-3 percent to 0-1 percent y/y), amongst others.