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18-11-2011, 05:43 AM
Business Times - 18 Nov 2011
Plunging exports cast long shadow on growth prospects
Electronics exports take the hardest hit; some fear economy may shrink in Q4
By TEH SHI NING
(SINGAPORE) Unexpectedly poor trade figures released yesterday have stoked anxiety over what lies ahead for economic growth. October's non-oil domestic exports (NODX) plunged 16.2 per cent from a year ago - more than twice the 7.8 per cent fall that the market was expecting and the sharpest contraction in 21/2 years.
Economists say weakness across key export categories, especially electronics, raises the odds of Singapore's economy shrinking sequentially in the fourth quarter, after narrowly escaping a technical recession in the third.
While October's fall was made sharper by last year's high base, the impact of waning demand globally was evident. Non-oil exports bound for the United States more than halved from a year ago, while shipments to the EU27 (the 27 member countries of the European Union) fell 31 per cent year on year, International Enterprise Singapore's statement yesterday said. Electronics exports were worst hit, shrinking 31 per cent year on year due to big falls in shipments of ICs, parts of ICs and parts of PCs.
What was particularly startling about electronics' plunge, however, was that it brought the seasonally adjusted monthly levels of electronics exports on a par with the lows of the 2001 and 2008-09 recessions, notes Citi economist Kit Wei Zheng.
This was possibly exacerbated by supply-chain disruptions caused by the flooding in Thailand, where 50 per cent of global hard disk drive volumes are made, says Goldman Sachs economist Mark Tan.
Coming just ahead of the festive season though, it does highlight just how weak global demand is, DBS economist Irvin Seah adds.
Non-electronics NODX contracted 6.7 per cent year on year in October too, after expanding a marginal 0.7 per cent in September. Weaker than before growth in pharmaceutical exports could not offset the fall in exports of ship & boats, specialised machinery and electrical machinery.
Overall NODX fell a seasonally adjusted 5.9 per cent from what it was in September to $13 billion in October - the lowest level since January last year.
This first of key economic data releases for Q4 - October's industrial production will be out next week - backs up the view among many market economists that Singapore is headed for a sequential GDP contraction in the final quarter of 2011. But cautioning against over-pessimism on the basis of NODX alone, Mr Kit points out month-on-month growth in non-oil retained imports of intermediate goods for categories such as wholesale trade and transport and key electronics segments such as semiconductors.
While this could be a matter of timing or a 'more worrying loss of market share by Singapore-based manufacturers', Mr Kit thinks the rise in electronics indices on the latest Purchasing Managers' Index signals that electronics output and exports could stabilise within the next two quarters, or even as early as this month.
Credit Suisse economist Wu Kun Lung agrees, citing also recent improvement in the US ISM (Institute for Supply Management) new orders, but he worries that pharmaceutical exports are looking vulnerable, on the basis of business expectation surveys.
Looking further ahead, Bank of America Merrill Lynch economist Chua Hak Bin has cut his GDP forecast for next year to 2.8 per cent, noting that Singapore's government has been unusually downbeat with its articulation that 2012 growth may fall below the potential rate of 3 to 5 per cent.
Debt woes in the eurozone and persistent high unemployment in the US have curbed demand and hit exports elsewhere in Asia too, though not quite as badly as small, open Singapore.
South Korea's exports, for instance, are still growing despite growth sliding to a two-year low in October. Mr Wu notes that Singapore's exports have underperformed most of its regional peers in recent months - exports for Asia ex-Japan rose 13.8 per cent in September.
Plunging exports cast long shadow on growth prospects
Electronics exports take the hardest hit; some fear economy may shrink in Q4
By TEH SHI NING
(SINGAPORE) Unexpectedly poor trade figures released yesterday have stoked anxiety over what lies ahead for economic growth. October's non-oil domestic exports (NODX) plunged 16.2 per cent from a year ago - more than twice the 7.8 per cent fall that the market was expecting and the sharpest contraction in 21/2 years.
Economists say weakness across key export categories, especially electronics, raises the odds of Singapore's economy shrinking sequentially in the fourth quarter, after narrowly escaping a technical recession in the third.
While October's fall was made sharper by last year's high base, the impact of waning demand globally was evident. Non-oil exports bound for the United States more than halved from a year ago, while shipments to the EU27 (the 27 member countries of the European Union) fell 31 per cent year on year, International Enterprise Singapore's statement yesterday said. Electronics exports were worst hit, shrinking 31 per cent year on year due to big falls in shipments of ICs, parts of ICs and parts of PCs.
What was particularly startling about electronics' plunge, however, was that it brought the seasonally adjusted monthly levels of electronics exports on a par with the lows of the 2001 and 2008-09 recessions, notes Citi economist Kit Wei Zheng.
This was possibly exacerbated by supply-chain disruptions caused by the flooding in Thailand, where 50 per cent of global hard disk drive volumes are made, says Goldman Sachs economist Mark Tan.
Coming just ahead of the festive season though, it does highlight just how weak global demand is, DBS economist Irvin Seah adds.
Non-electronics NODX contracted 6.7 per cent year on year in October too, after expanding a marginal 0.7 per cent in September. Weaker than before growth in pharmaceutical exports could not offset the fall in exports of ship & boats, specialised machinery and electrical machinery.
Overall NODX fell a seasonally adjusted 5.9 per cent from what it was in September to $13 billion in October - the lowest level since January last year.
This first of key economic data releases for Q4 - October's industrial production will be out next week - backs up the view among many market economists that Singapore is headed for a sequential GDP contraction in the final quarter of 2011. But cautioning against over-pessimism on the basis of NODX alone, Mr Kit points out month-on-month growth in non-oil retained imports of intermediate goods for categories such as wholesale trade and transport and key electronics segments such as semiconductors.
While this could be a matter of timing or a 'more worrying loss of market share by Singapore-based manufacturers', Mr Kit thinks the rise in electronics indices on the latest Purchasing Managers' Index signals that electronics output and exports could stabilise within the next two quarters, or even as early as this month.
Credit Suisse economist Wu Kun Lung agrees, citing also recent improvement in the US ISM (Institute for Supply Management) new orders, but he worries that pharmaceutical exports are looking vulnerable, on the basis of business expectation surveys.
Looking further ahead, Bank of America Merrill Lynch economist Chua Hak Bin has cut his GDP forecast for next year to 2.8 per cent, noting that Singapore's government has been unusually downbeat with its articulation that 2012 growth may fall below the potential rate of 3 to 5 per cent.
Debt woes in the eurozone and persistent high unemployment in the US have curbed demand and hit exports elsewhere in Asia too, though not quite as badly as small, open Singapore.
South Korea's exports, for instance, are still growing despite growth sliding to a two-year low in October. Mr Wu notes that Singapore's exports have underperformed most of its regional peers in recent months - exports for Asia ex-Japan rose 13.8 per cent in September.
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