With a growth of 7.7% year-on-year in August, Singapore’s non-oil domestic exports (NODX) has come in better than expectations, say CGS-CIMB Research analysts Michelle Chia and Lim Yee Ping who had predicted a 3.4% year-on-year increase in the metric.
A major lift came from the recovery in the electronics sector which grew by 5.7% in August, widening from the 2.8% increase staged in July.
This in turn provided a lift to Singapore’s electronic NODX to Taiwan (+37.6% year-on-year), South Korea (+34.8% year-on-year) and the US (+28.2% year-on-year), say Chia and Lim.
“We think [this] reflects the renewed uptrend in global tech demand as well as stockpiling of key components ahead of the US restrictions on suppliers of key components to Huawei on September 15,” the duo elaborate in their September 17 note.
September 15 marks the date on which the Chinese tech company stops making its flagship Kirin chipsets – key components in mobile phones - due to pressures from the US on Huawei’s suppliers.
Also, the company will not be allowed to receive products from its non-American suppliers if their products contain a US technology.
See: China cries 'bullying' over US Huawei restrictions, Why Huawei ban will lead to balkanisation of tech
Aside from this, the slow progress in the renewal of US stimulus ending on September 30 is another concerning issue for Chia and Lim. This, together with the Huawei ban “may be a near-term headwind to the recent run-up in Singapore’s electronics exports,” the say.
Meanwhile, non-electronic NODX was up 8.3% year-on-year in August – a substantial increase from the 6.9% growth registered in July.
The incremental gains from the pharmaceuticals sector – which grew 5.6% year-on-year in August – “are abating” say Chia and Lim. This is due to the reduction in the stockpiling of medicines.
Still, the shortfall was “more than offset” by increments in other sectors such as non-monetary gold, specialised machinery and food preparations.
Meanwhile, Singapore’s manufacturing sector may just have caught the Covid-19 bug.
Singapore’s Purchasing Managers’ Index (PMI) – a barometer on manufacturing activity - remained in the green at 50.1 points in August thanks to an improvement in new orders and stronger factory output growth.
However, this was still a 0.1-point dip from July’s 50.2 points and follows weaker levels of new exports and inventories say Chia and Lim.
To this end, the duo say the metric has suffered “semi-permanent demand cuts inflicted by Covid-19 social distancing requirements”.
