Updated 10:04 AM Sep 17, 2011
SINGAPORE - Contrary to the contraction the market had been expecting, Singapore's non-oil domestic exports (NODX) surprised on the upside, rebounding strongly last month to register an increase of 5.1 per cent from the same period last year, in contrast to the 2.8-per-cent drop in July.
This could ease fears of a technical recession by the market, which had expected the NODX to contract by up to 6.5 per cent.
DBS economist Irvin Seah said: "While we do not discount the fact that economic conditions are worsening with the deteriorating sentiments, this set of figures is most encouraging, given the exceptionally high base and negative currency effects."
He noted that last August saw the second-highest NODX value of S$15.8 billion in the entire year, and "that's a significant high base to contemplate", adding that the Singapore dollar has appreciated by about 11 per cent in the last 12 months.
The lift in last month's exports came from sales of floating oil rigs and other marine vessels, as well as optical equipment. This helped the non-electronics segment expand by 20 per cent from last year.
Mr Seah pointed out that, on a month-on-month basis, the NODX increased by a seasonally-adjusted 8.3 per cent. "This may soothe the cries of a technical recession for now."
But CIMB regional economist Song Seng Wun pointed out that, excluding "lumpy exports" like oil rigs, the NODX actually fell 4.6 per cent from last year, with exports to key markets down except for China (up 16 per cent), Thailand (up 10 per cent) and Japan (up 1.6 per cent).
Total exports were dragged down by a drop in electronics, which extended its downward trend by falling 19 per cent. And Mr Song said demand for tech parts and components remains sluggish, "which means there could be little festive cheer for most tech exporters this year".
There was also weakness in the typically volatile pharmaceuticals sector, which dropped 7.1 per cent. Unless drug exports provide a massive lift in the rest of the year, Mr Song expected NODX to return to negative territory in September.
Barclays Capital economist Leong Wai Ho said the economy would likely narrowly avoid a technical recession in Q3, and remains on track to grow 5.5 per cent this year. Still, he is revising his GDP growth projections for next year down to 4 per cent from 4.5 per cent, on the back of a recent downward revision in its US and Europe growth assumptions. "We think the balance of risks has tilted towards lower growth, from higher inflation," he said.
Noting that senior policy-makers have been more "explicit" about their growth concerns in recent weeks, Mr Leong believed the Monetary Authority of Singapore would weaken the slope of the Singapore dollar policy band to 1 per cent next month, down from 3.5 per cent.
Mr Leong expected the Singapore dollar to move lower to US$1 to S$1.19 in six months, and US$1 to S$1.18 in 12 months, on broad US dollar weakness. He added: "We do not expect a narrowing of the policy band due to financial market volatility and fluctuations in euro/US dollar."
Via: http://www.todayonline.com/Business/EDC110917-0000451/NODX-rebound-may-ease-technical-recession-fears
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