How bad can the upcoming technical recession get?: DBS

August non-oil domestic export figures will be released this Friday and a poor negative headline number is on the cards. Headline NODX is expected to fall by 5.6% YoY, down from a decline of 2.8% in the previous month.

Cries of a technical recession will get louder and questions will surely turn to “how bad can it get” rather than “is it really that bad”. While we do not discount the fact that economic conditions are worsening with the deteriorating sentiments, there is more than meets the eyes in this latest set of figure.

August 2010 recorded the second highest NODX value of SGD 15.8bn in the entire year and that’s a significant high base to contemplate. Concomitantly, the Sing dollar has also appreciated by about 11% in the last 12 months. And that’s a huge negative currency effect as well. So, with an extremely high base and a big negative effect, it shouldn’t come as a surprise that NODX will fall further, at least from a year-on-year basis.

Hence, the heart of the issue lies in the sequential change. If export sales show a more pronounced improvement compared to the previous month, it will surely lower the risk of a technical recession despite a poor headline number.