Chart of the Day: See how Singapore’s downtrodden NODX contracts for the 2nd year

The first time it contracted in 2 consecutive years was during the 08-09 GFC.

Singapore’s economy is driven by external demand and export performance, two factors which have a strong bearing on the nation’s growth prospects. But as it is, NODX sales have been lacklustre.

In a report, DBS outlines that for the first six months, the total value of NODX is about 2.3% lower than in the same period last year. Risk is that NODX may post another year of contraction after a 6% drop in 2013.
Note that NODX has never contracted by two consecutive years except during the global financial crisis in 2008-09, when sales were down by 7.9% and 10.6% respectively.

DBS adds that the main drag in recent time comes from electronics export sales. The electronics cluster is in the doldrums. Electronics exports have been declining for the last 23 months and the recent “firm specific” disruption to production capacity is adding salt into the wound. While it remains to be seen whether the capacity disruption will be permanent (i.e. firm shutdown and relocation) or temporary (upgrade in production line), the impact on exports and industrial growth has been manifested.

Here’s more from DBS:

Moreover, as we expect a gradual improvement in global demand ahead, which will lift manufacturing activity, we do note the fact that the sector is weighed down by structural challenges. Domestic restructuring has resulted in a labour crunch, which is crimping export competitiveness and affecting the performance of exports and manufacturing. Such drag is already affecting GDP growth.

Singapore is ultimately an export dependent economy. So if NODX does not turn around soon, growth will surely be impacted.