Chart of the Day: Why we can all forget about an improvement in Singapore's electronics segment

It's not happening anytime soon.

BNP Paribas bluntly said in its report that to call Singapore’s May non-oil domestic exports (NODX) “disappointing” would be an understatement.

According to its report, declines of 7.5% m/m sa and 6.6% y/y were well below market and their expectations (+0.5% y/y and 0.0% y/y respectively). 

Here's more from BNP Paribas:

Financial markets look to have shrugged off the outturn, seemingly accepting that Singapore exports can be extremely volatile, such a miss is neither unheard of nor unexpected.

Yet, implications for the near-term regional trade and manufacturing outlook should not be ignored. Normally, one would look to the usual culprit, pharmaceuticals, for an explanation.

On this occasion, while it could partially explain the annual fall in export receipts, we estimate pharmaceutical shipments are growing at an annualised pace of 18.9% 3m/3m sa. 

Consequently, the explanation lies with other, less volatile products, many of which are also produced in other ASEAN economies.

Electronics exports were a particular disappointment. By our estimates, shipments fell 9.1% m/m sa in May and have collapsed at an annualised 23.9% 3m/3m saar pace.

With the city-state’s electronics cluster in secular decline the drop in electronics shipments is hardly surprising. Moreover, with the government policy overtly transitioning to higher value-add service sectors, sustained weakness is to be expected.

Thus, the likely dent to Singapore’s underlying economic momentum in Q2 implied by the print may prove limited.

Nonetheless, given Singapore’s position as a centre for semiconductor manufacturing, it remains a bellwether for regional electronics exports. In particular, the data point to deceleration in Malaysian and Thai electronics exports.

Of the two, Malaysia appears most vulnerable given that electronics products account for nearly 40% of its exports, compared to 20% in Thailand.