Singapore NODX seen to moderate in January then rise gradually

Slight hiccup this month.

Singapore's non-oil domestic exports (NODX) might have rebounded in December, but this January it should show relatively tepid growth as the festive season effect will have already faded, according to DBS senior economist Irvin Seah.

But after the predicted bump in January, NODX should steadily soar on the back of an improving global economic outlook, added Seah.

Here's the full analysis and outlook on Singapore's NODX:

December non-oil domestic exports (NODX) bounced back with a vengeance after the slump in November. Headline NODX expanded by 6.0% YoY in the month, up from -8.9% previously. Sequentially, that translates into a surge of 9.2% MoM sa, a strong rebound indeed from the 4.2% decline in November. While the turnaround is pretty much in line with expectation, the strength did come as a pleasant surprise.

Firstly, the dip in November NODX in our opinion is mainly due to two factors: a moderation in post-Christmas season demand and an industry specific downswing in the biomedical cluster. And these two factors are transient in nature. At absolute dollar value, biomedical bounced back in December while sales for electronics components also picked up in the month, ahead of a forthcoming Chinese New Year lull.

It’s seasonal effect at full swing. Plants in China will typically ramp up their production ahead of the New Year holiday when production will stop completely for about 2 weeks thereafter. Hence, orders for components from local manufacturers have a tendency to spike up before the festive season so as to cater to the rise in production. This is the main reason for the upside blip in December NODX on top of the fact that global economic conditions are generally improving.

That said, expect the NODX to moderate again in January on account of the festive season effect. But beyond that, exports and to a large extent, manufacturing, will be on a gradual rising trajectory. This comes against the backdrop of the improvement in the global economic outlook.