Find out why Singapore’s surprising export growth is just a short-lived reprieve

Local growth momentum remains very patchy.

Market watchers were surprised when Singapore’s non-oil domestic exports figures for August beat gloomy forecasts. However, it may well be too early to celebrate as the good headline figure was driven by volatile sectors.

According to Nomura, the outperformance was largely due to volatile exports growth of ships and boats, which rose by a stunning 1337.8% compared to a -40.7% decline in July.

Pharmaceuticals also surged by 26.9% from -5.7% in July. These two sectors drove the country’s 6.0% NODX growth, but the gains are unsustainable.

“Given the volatility of NODX data since the beginning of the restructuring, however, we would not be surprised if this pick-up turns out to be short-lived, consistent with our view  that Singapore‟s growth momentum will remain patchy. While the August NODX data appear positive for Q3 GDP growth, NODX can deviate quite significantly from industrial production, which feeds directly into the calculation of manufacturing sector GDP,” stated Nomura.

Here’s more from the report:
Excluding the volatile exports of pharmaceuticals and ships, NODX rose by a more
modest 2.8% from -1.4%.

Therefore, the data indicate that the pickup in external demand may finally be translating into improving exports, though at a much more modest pace than the August headline NODX figures suggest.

If the export recovery sustains, it may be a sign that the economic restructuring in the manufacturing sector may finally be bearing fruit.