SINGAPORE — Non-oil domestic exports (Nodx) posted a surprise contraction last month, dipping 0.7 per cent from a year ago against economists’ expectations of an expansion and ending a growth streak that was the strongest in more than six years.
The sharp pullback in April was attributed mostly to the slump in pharmaceuticals, although economists also noted the moderation in growth from the electronics sector.
Economists have mixed views on the sustainability of the ongoing trade recovery, with some calling April just a temporary blip.
More sanguine observations are that the uptick in the tech cycle may be slowing.
Nodx contracted in April after five consecutive months of growth, reversing from the 16.5 per cent year-on-year expansion in March, trade agency International Enterprise (IE) Singapore said on Wednesday.
Economists in a Reuters poll had expected Nodx to expand by 12.4 per cent from a year earlier.
Shipments of non-electronic products contracted 2.9 per cent in April from a year earlier, after the 20.8 per cent expansion in the previous month. The decrease was led by pharmaceuticals, non-electric engines and motors and non-monetary gold.
Meanwhile, shipments of electronic products expanded by 4.8 per cent, moderating slightly from the 5.2 per cent expansion the previous month, with contributions led by integrated circuits, personal computer parts and disk media products.
“Pharmaceuticals, which tends to be a volatile cluster both in terms of production and exports, declined by 39.9 per cent from a year ago, partly due to the high base as April 2016 levels were a record high since April 2015. Pharma production has been contracting for the whole of the first quarter by an average of 13.5 per cent,” said Maybank Kim Eng Research economists Chua Hak Bin and Lee Ju Yee.
Mr Chua and Ms Lee, however, added that the weak April exports numbers are likely a “temporary blip” from the trade recovery that Singapore has been witnessing for the past five months.
“Electronics exports are still expanding at a healthy pace and more representative of global demand. We think Singapore’s exports and manufacturing will continue to be well supported for the rest of this year, albeit at a more moderate pace, in line with our gross domestic product forecast of 3 per cent for 2017,” Mr Chua and Ms Lee said.
UOB economist Francis Tan shared similar sentiments.
“Nodx growth rates are notoriously volatile and a single month of technical pullback should not veer us off course in our longer-term view of the recovery in global trade for 2017,” he said.
“We still maintain our positive outlook on the overall Nodx expansion for 2017 of 0.7 per cent, supported by the continued growth in electronics exports,” Mr Tan said.
Meanwhile, ANZ economist Ng Weiwen pointed out that the moderation in electronic Nodx growth potentially points to tentative signs of a maturing tech cycle.
“It would be challenging for the recent strength in exports to be sustained in the second half of 2017.”
“Export demand may be peaking … Signs are surfacing that the manufacturing rally over the past six months could be nearing its end. The strong performance thus far has been largely driven by consumer demand. To sustain the current pace of expansion, much will really depend on companies increasing their (capital expenditure) going forward,” DBS senior economist Irvin Seah said.
Last month, shipments to four of the top 10 markets — the European Union (EU), Hong Kong, United States and Japan — declined, outweighing the increases to Taiwan, South Korea, China, Malaysia, Indonesia and Thailand.
Exports to the EU and the US shrank by 36 per cent and 9.6 per cent in April, respectively, reversing from the previous month’s growth of 10 per cent and 1.8 per cent.
Major contributors to the decline were pharmaceuticals and non-electric engines and motors.
Exports to China, meanwhile, moderated to 10.9 per cent expansion from the previous month’s jump of 45.5 per cent.