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Nikkei Markets

Singapore non-oil domestic exports fall for 6th month

Rise in China shipments could be due to the frontloading of exports in August

Non-oil domestic exports fell 8.9% in August from a year ago, easing from July's decline of 11.4%.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore's non-oil domestic exports fell year-on-year for a sixth consecutive month in August but the drop was smaller than expected and there was a sequential increase in overseas shipments for the second month running.

Singapore is often regarded as a bell weather for export-reliant Asian economies, given that its total trade is more than three times the size of its gross domestic product. Economists said the outlook remained uncertain although the latest data lent weight to the view that the city-state could avoid a technical recession in the current quarter.

According to data from trade agency Enterprise Singapore on Tuesday, non-oil domestic exports fell 8.9% in August from a year ago, easing from July's decline of 11.4%. Analysts polled by Refinitiv had expected non-oil domestic exports to fall by around 12% on-year.

Domestic exports of electronics dropped 25.9% on-year in August, worsening slightly from July's 24.2% plunge, while overseas shipments of non-electronics fell by just 2.2% on-year, improving from July's decline of 6.7%.

On a month-on-month seasonally adjusted basis, non-oil domestic exports rose by 6.7% to 14.3 billion Singapore dollars ($10.4 billion), quickening from July's on-month improvement of 3.5%.

"While electronics exports remained weak, we think there are tentative signs of a bottom as reflected by the improvement in level terms," Maybank Kim Eng said in a note to clients, referring to the dollar value of shipments which was the highest since January 2019.

"Singapore will narrowly dodge a technical recession in the third quarter on frontloading of exports, stronger ACU lending and diversion of visitors from Hong Kong," added the stockbroking and derivatives arm of Malaysia's Maybank. ACU, or Asian currency unit loans refer to offshore loans made by banks in Singapore.

Singapore's economy contracted by 3.3% in the second quarter on a seasonally adjusted an annualized basis. Should GDP continue to shrink, the city-state would fall into a technical recession which is defined as two straight quarters of sequential declines.

In terms of key export markets, shipments to China rose 38.5% on year, but this was offset by large declines to other markets such as Hong Kong, U.S., Japan and Indonesia.

Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp., said part of the pickup in exports to China could be due to front-loading activities ahead of Sept. 1 when a slew of new U.S. tariffs on Chinese goods were originally due to take effect.

Singapore reports non-oil domestic exports as prices of refined oil products tend to be volatile while total exports include goods worth billions of dollars that are produced elsewhere but shipped through the city-state's container ports.

Ling noted the exports to most of Singapore's key markets continued to decline by double-digits, indicating that continued weakness in the global economy.

Nonetheless, she expects non-oil domestic exports will fall at a slower pace in the coming months, bringing the contraction for the full year to within Enterprise Singapore's latest forecast for a decline of 8-9%.

Looking ahead, Citi economist Kit Wei Zheng said the Monetary Authority of Singapore will probably slow the Singapore dollar's rate of appreciation when it unveils its half yearly policy statement in October. Unlike other central banks that rely on interest rates, Singapore manages monetary policy through the exchange rate.

MAS will not be overly aggressive in loosening monetary policy, however, as July-August data suggests a technical recession can be avoided. Singapore could also benefit from the recent expansion in semiconductor giant Micron's facility, Citi's Zheng added.

--Kevin Lim

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