Business

Unexpected rise in non-oil domestic exports

Trade figures overturn expectations of contraction


Singapore exporters have endured a slow year amid lacklustre global growth, but trade data out yesterday seemed to offer cause for hesitant optimism.

Non-oil domestic exports posted an unexpected 11.5 per cent rise last month over the same month last year, overturning economists' expectations of a 2.7 per cent contraction.

Still, economists warned that it is still too early to tell if the data signals a sustained improvement for trade or is a one-off, given the uncertainties facing the world economy in the coming year.

Both electronic and non-electronic shipments helped lift last month's trade numbers.

In particular, the volatile pharmaceuticals sector saw a 44.8 per cent surge in shipments compared with the same month a year ago.

Ups and downs in pharma can have an "exaggerated" impact on trade figures because drugs are a big part of non-oil domestic exports, noted CIMB Private Bank economist Song Seng Wun.

Pharma shipments had also been the main culprit behind a 12 per cent decline in non-oil domestic exports in October.

Pharma aside, economists noted that electronics manufacturing appears to be staging a slow but steady recovery, which helped boost last month's trade figures.

Electronic non-oil domestic exports grew 3.5 per cent, largely due to more shipments of integrated circuits, parts of PCs and disk media products.

This comes on the back of more upbeat manufacturing data in recent months. Singapore's Purchasing Managers' Index - an indicator of manufacturing activity - showed lathat factory output grew for the third straight month last month, after more than a year of contraction.

"It does seem like electronics is picking up, but it remains to be seen whether this will continue," said Credit Suisse economist Michael Wan.

While global economic growth is expected to improve next year on the back of a strengthening US economy, there are also a number of risks, Mr Wan noted.

WEAK LABOUR MARKET

Singapore will also have to deal with higher interest rates in the coming year at a time when the labour market is weak and companies' hiring intentions remain subdued, Mr Wan added.

Mr Allen Ang, the group managing director of Aldon Technologies, had been hopeful for a 20 per cent to 25 per cent rise in sales in this half of the year "but it hasn't happened".

The firm, which refurbishes parts for flat panel and semiconductor producers, also expects sales to be flat in the coming year.

Mr Ang said: "Electronics manufacturing seems to be slowly gaining momentum globally... but the prices of products have come down tremendously and (my customers) have had to do a lot of cost containment.

"Though the number of customers has grown and our product range has also expanded, revenue has stayed flat because of price erosion."

Still, Mr Song is holding out for a less dreary end to the year.

Singapore's last month's trade rebound is consistent with data elsewhere in the region; markets such as Taiwan, South Korea and Indonesia also posted strong export growth, he noted.

"We have to be mindful that it's a low base, but we're still seeing some signs of recovery.

"We can take heart that it might not be all doom and gloom going forward, and hopefully we'll be ending the year on a positive note."

It does seem like electronics is picking up, but it remains to be seen whether this will continue.Credit Suisse economist Michael Wan
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