Sharp slowdown in Singapore's exports raises growth fears

Date: Wednesday, July 18, 2018
Source: Nikkei Asian Review

 Singapore exported far fewer goods than expected in June as global demand for electronics cooled, a fresh sign that business momentum is waning in Southeast Asia's richest country.

Shipments to most major markets, including China, declined, prompting some economists to warn of growing downside risks to their growth forecasts.

"What is particularly concerning for a small open economy like Singapore is that these figures are looking weak before the global trade war has even really got going," said Rob Carnell, ING's chief economist and head of research for Asia-Pacific.


The latest exports data reinforce the need to trim gross domestic product growth figures for Singapore, along with other Asian countries, in response to the bleaker trade outlook, ING said.

According to data from Enterprise Singapore, the government agency responsible for trade, non-oil exports rose 1.1% in June from a year ago. That's a steep decline from the 15.5% growth registered in May and is also well below analysts' estimates of around 8% growth in June.

Exports of electronics contracted for the seventh straight month, falling 7.9% year on year in June after dropping 7.8% in May.

Non-electronics exports grew 4.6% following a 26.2% expansion in the previous month, with food preparations, pharmaceuticals, and petrochemicals contributing the most to growth, the agency added.

Compared with a month ago, non-oil domestic exports fell 10.8% to 15.1 billion Singapore dollars ($11.1 billion) after seasonal adjustments, with declines seen in both electronics and non-electronics, Enterprise Singapore said.

Just days ago, the authorities reported slower-than-forecast GDP growth for the second quarter amid escalating tensions between the U.S. and its trading partners.

ING's Carnell said the latest shipments data were disappointing with many major export components dropping from May levels. They "mirror other weak export releases this month in the region, notably soft Korean exports," Carnell said.

Singapore reports non-oil domestic exports as these provide a better gauge of the country's economic activity. This is because prices of refined oil products tend to be volatile, while total exports include the billions of dollars of goods produced elsewhere that are shipped through Singapore's container ports, the world's second busiest after Shanghai.

According to Enterprise Singapore, non-oil exports to China, the city-state's largest market, declined by 15.8% on year in June, worsening from the previous month's decrease of 6.0%. Shipments to South Korea contracted by 31.4%, following the 23.6% decrease in May.

However, exports to the U.S. rose 30.9%, after climbing 54.0% in May.

Looking ahead, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said that the slowdown in trade would begin to drag on Singapore's economic growth in the second half since the divergence between electronics output and exports was not sustainable.

Singapore's output of electronics rose 16.9% in the first five months of 2018, according to the Economic Development Board.

"Recent property measures appear ill-timed and overly harsh, coming on the back of a visible growth slowdown and an escalating U.S.-China trade war," the Maybank Kim Eng economists added in a note to clients.

Singapore earlier this month unleashed a rash of cooling measures to curb what it described as "euphoria" in the private housing market. The measures are expected to further hurt the construction sector, the weak link in the domestic economy.

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