Singapore NODX growth poised to hit 7% this year

Thanks to a low base in 2013.

According to UOB Economic-Treasury Research, with a low NODX base in 2013 (6% contraction) and its view of an improving external environment, it maintains its NODX growth forecast of 7% in 2014, significantly higher than the trade agency’s forecast of 1% – 3%.

Singapore’s non-oil domestic exports (NODX) expanded 9.1% y/y in January, above consensus expectation of a
7.1% y/y growth, and better than the 3.3% y/y contraction a month ago. The better-than-expected NODX was partially due to the low base effect (NODX contracted 30.6%y/y in February 2013). On a seasonally-adjusted basis m/m basis, NODX grew 7.2%, compared to the 5.0% decline in January.

The expansion in NODX was due to the growth in non-electronic NODX that outweighed the decline in electronic NODX. Non-electronic exports expanded 15.4% y/y in February, following the 3.5% y/y expansion a month ago. It was led by the strong performance from petrochemicals (+49.3%), printed matter (+57.1%), and pharmaceutical (+21.8%) exports which finally reversed the consecutive decline seen for 8 months.

Electronic NODX had declined for the 19th consecutive month and contracted 3.5% y/y in February, due to weak performance from PC-related product groups such as disk media products (-22.8%), parts of PCs (-9.6%), and ICs (-8.7%) remained weak.

Non-oil re-exports (NORX) continued 11 months of strong growth and expanded 15.5% y/y in February, following an increase of 9.0% y/y a month ago. NORX growth was supported by the expansion in both electronic (+21.3% y/y) and non-electronic NORX (+9.9% y/y). The top three contributors to the NORX rise were the Hong Kong (+36.2% y/y), China (+40.4), and South Korea (+38.3%).

We are optimistic that the steady recovery in G3 economies this year will provide a boost to Singapore’s export demand. Recent higher frequency indicators showed some signs of improvement in external demand.

For instance, the latest ISM PMI (53.2 in Feb, compared to 51.3 in Jan) from the United States showed that purchasing managers are more optimistic in the business environment going forward, especially after the negative impact felt from the extended and severe winter.

Additionally, the slight uptick in the US Semi Book to Bill ratio (from 1.02 to 1.04 in Feb) showed that semiconductor demand remained positive and will likely translate to better growth in our semiconductor industry this year.