Singapore NODX fell 6.6% in March

Worse than market's forecast.

According to UOB Economic-Treasury Research, Singapore’s non-oil domestic exports (NODX) slumped to a 6.6%y/y contraction in March after expanding a revised 8.9% y/y in February, much worse than consensus expectation of an already modest 0.5% y/y growth forecast.

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The weaker-than-expected NODX was largely due to the broad-based weakness among the major product groups (especially pharmaceuticals and integrated circuits) even though there were the bright spots of sustained double-digit expansions from petrochemicals and parts of ICs.

On a seasonally-adjusted basis m/m basis, NODX declined by 8.9%, compared to the 7% expansion in February. This was the biggest sequential decline since August 2012.

Non-oil re-exports (NORX) continued to impress in March as the pace of growth accelerated to 18.7%y/y after expanding 15.5% y/y in February, marking a year-long period of uninterrupted strong growth. NORX growth was again supported by the expansion in both electronic (+19% y/y) and non-electronic NORX (+18.4% y/y).

The top three contributors to the NORX rise in March were the Hong Kong (+41.3% y/y), China (+26.8), and South Korea (+35.6%) unchanged from last month.

The March NODX outcome was a disappointment and it dragged the first quarter’s NODX back into contraction territory (-1%y/y in 1Q). Nonetheless, this was just a month’s data point, and we remain optimistic that the steady recovery in G3 economies this year will provide a boost to Singapore’s export demand, especially as weather conditions improve in US while the economic environment continues to stabilise in Europe.

That said, the environment remains challenging for electronics exports as the latest US Semi Book to Bill ratio fell to 1.0 in February (from 1.04 in Jan and 1.02 in Dec). With a low NODX base set in 2013 (6% contraction) and our view of an improving external environment, we maintain our NODX growth forecast of 7% in 2014, which is expected to provide strong support for our GDP growth forecast of 4.3% this year.