Singapore’s non-oil domestic exports (NODX) fell by 5.6% y-o-y in October, coming in below Bloomberg's median estimate of -1.7% y-o-y. The month's decline breaks a 22-month streak that began in November 2020, although this was partly attributed to the high base seen a year ago, says Selena Ling, chief economist and head of treasury research & strategy at OCBC Bank.
October's drop is also the weakest NODX performance since November 2019 at -5.9% y-o-y, Ling notes.
The decline was attributed to the high base seen the year before. During the month, NODX for electronics and non-electronics decreased.
Electronics NODX fell by 9.3% y-o-y as integrated circuits (ICs), disk media products and parts of personal computers (PCs) led the decline at a respective 11.1%, 45.7% and 31.6%.
Non-electronics NODX also fell by 4.5% y-o-y with pharmaceuticals, non-monetary gold and petrochemicals contributing the most to the decline at 34.7%, 45.5% and 18.4% respectively.
On a m-o-m seasonally adjusted basis, NODX fell by 3.7% to $15.9 billion, extending the previous month’s decline. October’s m-o-m decline was attributable to the declines in both electronics and non-electronics.
See also: Singapore’s NODX eases to 3.1% in September as electronics exports decline from high base
In October, NODX to the top 10 markets declined as a whole, though NODX to the US, Taiwan, Japan and South Korea rose.
The largest contributors to the decline in NODX were China, the European Union (EU) 27 and Malaysia, which fell by a respective 32.0%, 19.5% and 16.1%.
NODX to China fell yet again due to non-monetary gold (-99.6%), specialised machinery (-25.9%) and petrochemicals (-21.9%).
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NODX to the EU 27 fell due to pharmaceuticals (-39.6%), non-electric engines & motors (-79.4%) and petrochemicals (-66.0%).
NODX to Malaysia fell due to non-monetary gold (-53.8%), diodes & transistors (-53.3%) and measuring instruments (-57.2%).
At the same time, NODX to emerging markets fell by 0.5% in October. This was mainly due to the decline in exports to CLMV or Cambodia, Laos, Myanmar and Vietnam (-23.6%), Eastern & Southern Europe or non-EU (-73.1%) and the Caribbean (-16.6%).
NORX growth
In October, non-oil re-exports (NORX) grew by 6.4% y-o-y, easing from September’s expansion of 20.2%. The growth in NORX during the month was thanks to expansions in both electronics and non-electronics.
On a y-o-y basis, electronic NORX grew by 2.4% due to telecommunications equipment (+37.8%), diodes & transistors (+31.0%) and parts of PCs (+17.7%).
Non-electronic NORX grew by 11.3% in September. This was mainly due to due to specialised machinery (+62.7%), non-monetary gold (+25.7%) and non-electric engines & motors (+8.3%).
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On a m-o-m seasonally adjusted basis, NORX fell by 8.2% to $30.7 billion with declines in both electronic and non-electronic NORX.
NORX to the top 10 markets as a whole rose during the month, with the top three contributors being Malaysia (+35.7%), Indonesia (+32.0%) and the US (+11.7%).
Oil domestic exports
Oil domestic exports grew by 33.1% in October on a y-o-y basis, easing from the 56.5% expansion in September.
This was thanks to higher exports to Indonesia (+58.7%), Panama (+68.6%) and the EU 27 (+48.6%).
In volume terms, oil domestic exports grew by 33.1%.
On a m-o-m seasonally adjusted basis, oil domestic exports fell by 4.0%.
Total trade
Total trade grew by 8.6% y-o-y, easing from September’s 20.7% growth.
Total exports rose by 6.3% while total imports grew by 11.1%.
On a m-o-m seasonally adjusted basis, total trade fell by 5.1% to $110.6 billion.
What the economists say
In her report, OCBC's Ling says Singapore's NODX growth is "likely" to contract again in November and December, bringing the country's full-year growth for 2022 to the lower end of the government's official NODX growth forecast of 5% to 6%.
As such, she has lowered her growth forecast for Singapore's gross domestic product (GDP) for 2022 to 2.0% from 2.5% "in anticipation of a further moderation/stalling in NODX growth".
"Since the International Monetary Fund (IMF) had downgraded its 2023 global growth forecast to 2.7% while the World Trade Organization (WTO) had warned global merchandise trade will slow to just 1% next year with Asia’s total export growth to also slow to 1.1% from the projected 3.5% and 2.9% in 2022 respectively, there is clearly downside risk," she says, explaining her "prudent" decision to lower her GDP forecast growth for 2023.
Ling continues that Singapore may see more "challenging days ahead" as macroeconomic concerns such as inflation and recession continue.
"But with global central banks having aggressively frontloaded their monetary policy tightening for most of 2022 in an attempt to tamp down demand conditions, it appears that global growth prospects are set for a more dramatic slowdown into 2023 as many central banks prioritise combating inflation over supporting growth," she writes.
“With the global economy still struggling to gain traction amid the twin headwinds of rising interest rates and persistently high inflation, coupled with ongoing geopolitical uncertainties, the growth and trade prognosis may remain patchy for the rest of 4Q2022 and into 1Q2023,” she adds.
On the NODX decline to China, Ling points out that there may be “hopes for green shoots” in the Chinese economy with the country’s recent relaxation of its Covid-19 strategy and property market measures. That said, its latest October retail sales reading of -0.5% y-o-y suggests consumer sentiments “remain weak”.
UOB’s senior economist Alvin Liew note that the cracks in Singapore’s export outlook has become “more visible” now with the first y-o-y NODX contraction in nearly two years.
“The worsening electronics performance, and increasingly weaker demand from more top export destinations, especially China, are clearly weighing negatively on NODX momentum and manufacturing demand,” he writes.
On this, Liew has lowered his NODX growth forecast for the full-year 2022 to 4% from his previous estimate of 5%.
The lower estimate comes as he factors in a “sharper slowdown” in NODX and a “very unfavourable” high base effect for the rest of 2022, he explains. He is also expecting to see double-digit declines in Singapore’s NODX in November and December.
Maybank Securities’ Chua Hak Bin and Lee Ju Ye see the drop in exports as an “early warning sign” of a potential recession in 2023.
“Mounting global headwinds are starting to overwhelm the reopening tailwinds, although the offsetting crosscurrents will likely mean that any recession will be shallow, if it materialises,” they write.
“We think a ‘two-sided economy’ will become more stark in 2023. Some of the reopening sectors, like hospitality, aviation, food and beverage (F&B), and construction, will expand at a healthy pace, even as manufacturing and trade-related activities contract,” they add.
Moving forward, Maybank’s Chua and Lee also expect Singapore’s NODX to “continue declining” in the 4Q2022 and throughout the first half of 2023 as external demand weakens, especially for electronics.
Singapore’s October manufacturing print, which will be released on Nov 25, will likely contract as well given the weak export and Purchasing Managers’ Index (PMI) numbers, they say.
Unlike their peers, however, the analysts have kept their NODX growth forecast at 5% and 6% for 2022 and -4% to 1% in 2023.
“A China reopening remains a wildcard in 2023, which can potentially boost Singapore’s exports as China alone accounts for 17.6% of total NODX,” they write.
HSBC Global Research analyst Liu Yun said that the decline in October’s NODX sent a clear message that “trade headwinds are intensifying”.
“While the weakness was broad-based, the most evident impact on rising trade challenges is well reflected in its electronics weakness,” Liu notes, referring to Singapore’s electronics NODX falling consistently on a m-o-m basis since July.
“After all, Singapore was one of the Asian economies that significantly benefitted from surging demand for electronics, and now, the ‘pay-back’ time has come,” she adds. “Leading indicators like PMI fell below the 50 watermark since September, suggesting intensifying trade headwinds in the coming months.”
To her, the next “signpost” to look out for is Singapore’s final GDP print for the 3Q2022, which will be released on Nov 23.
“As the 3Q intellectual property (IP) turned out to be weaker than that in the advanced print, it will be crucial to see how services fared, and whether its September performance was enough to offset the manufacturing weakness,” Liu writes. “That said, we expect sectors that have previously lagged, including consumer-facing and travel-related industries, will continue to drive growth this year. Challenges will likely materialise next year, with intensifying trade headwinds and fading domestic re-opening tailwinds.”
