What you need to know about Singapore NODX's 30.6% decline

Should you be alarmed?

According to DBS, a 30.6% YoY drop in Feb13 non-oil domestic exports(NODX) sounds scary but there is more than meets the eye to that set of figures. 

Here's more:

Plainly, it’s distorted by base effect, seasonal effect, industry specific effect and currency effect, all thrown into the mix. To be clear, that’s massive distortion at work and quite likely, this is going to be a one-off.

Firstly, the headline number, the one which newspaper often putin bold and on the front page, is based on a year-on-year comparison. Note that NODX peaked at SGD 16.6bn in Feb12, the same period last year, and it has been easing since then. So againstsuch an exceptionally high base, the drastic year-onyear drop shouldn’t come as a surprise.

And there is the Chinese New Year effectto consider. Production and export activities usually slow during the festive period due to the lesser number of working days in the month plus workers going on vacation leave.

Moreover, the festive season falls on different months every year- February this year versus January last year. This further exacerbates the YoY decline.

Furthermore, February’s drop is compounded by the industry specific downswing in the pharmaceutical cluster. Pharmaceutical exports plunged by a massive 56.5%. Occasional plant shutdowns to switch to different product mixes is one ofthe main reasons forthe volatility in this industry.

But the pointto note is that this is industry specific. It’sthe nature ofthe business.

Lastly, there is the currency effect. Compared to the same period last year, the SGD appreciated by about 1.2% versusthe greenback in February. And since all export revenues are in USD terms, and thatthe NODX figures are reported in SGD,the strengthening in the SGD will obviously imply translation losses.

Granted that weak demand is still the main reason but it helps to read between the numbers while assessing the recent NODX figures. In this regard, the figures for the coming months will offer a more accurate picture on the export performance.