Technical recession back in frame as exports slip

SINGAPORE - Singapore's non-oil domestic exports (NODX) posted an unexpected dip in November, dragged down by a big drop in electronic exports and fewer shipments to the key markets of Hong Kong, Malaysia and the United States.

The NODX, a prime indicator of Singapore's economic health, fell 2.5 per cent last month from a year ago, against market expectations of a 1.7 per cent rise.

It continued the decline seen since August this year, with the only respite coming in October when the NODX jumped 7.9 per cent.

The under-performance has led Citigroup's economist Kit Wei Zheng to raise the prospect of a technical recession, defined as two straight quarters of decline in the gross domestic product.

"With October-November NODX levels still below the 3Q average, the risk of sequential contraction in 4Q GDP cannot be discounted, though November's industrial production data will provide futher clarity here," he said in a brief report.

Compared to the previous month, November's NODX slipped by a seasonally adjusted 0.3 per cent, against a 1.2 per cent fall in October and market expectations of a 2.9 per cent increase.

With the release of the latest trade numbers yesterday by trade promotion agency International Enterprise Singapore, UOB's economic-treasury research department calculated that "the NODX in the first 11 months of 2012 grew by 2.2 per cent year-on-year, held mainly by a growing non-electronic NODX segment (+4.8 per cent)".

This is still within the 2-3 per cent official forecast for the full year.

UOB estimated that the electronic NODX has declined by 2.6 per cent in January-November, shrinking its share in total NODX to 33.7 per cent, down from 35.3 per cent in 2011 and 52.3 per cent before the 2007-08 global recession.

"Non-electronic NODX has grown in importance over the years as Singapore diversifies exports away from being too electronic-dependent," it says. 

Strong pharmaceuticals (+29.6 per cent), structures of ships and boats (+109.6 per cent) and non-monetary gold (+45.4 per cent) shipments helped push domestic non-electronic exports up 6.3 per cent year-on-year in November, but this was only half the pace seen in October.

Led by a plunge in integrated circuits (-21.5 per cent), PC parts (-20.8 per cent) and IC parts (-22.4 per cent), domestic electronic shipments decreased 16.5 per cent last month, the fourth straight monthly decline.

"Singapore's electronic exports continued to be mired by a difficult global environment as evident by the US Semi-Book-to-Bill ratio registering a 5th month of decline, registering 0.75 in October," UOB said.

Leif Lybecker Eskesen of HSBC Bank added: "Today's trade numbers were testament to the soggy external demand conditions, especially in Europe and the United States."

But Citigroup's Mr Kit said it was striking that the NODX continued to underperform against Singapore's North Asian rivals.

"Apart from a less favourable product mix, this may partly reflect cost-competitiveness erosion and translation losses from real exchange rate appreciation," he said.

IE Singapore says Hong Kong, Malaysia and the US were the top three contributors to the NODX's year-on-year drop in November. Shipments to Malaysia fell 16.7 per cent, Hong Kong 15.3 per cent and the US 7.0 per cent.

Domestic exports to the European Union, Singapore's biggest market, edged up 0.5 per cent. Exports to China were up 9.4 per cent and Thailand 14.3 per cent.