What does it mean for Singapore that exports have fallen much worse than expected in December?

Singapore’s export data bucked the recent positive turn in the region.

Non-oil domestic exports (NODX) fell by 16.3% y-y in December after declining 2.6% in November, much worse than expected. According to Nomura, the market consensus was a 7.6% drop.

Here’s what analysts had to say about the recent data:

Song Seng Wun, analyst, CIMB

NODX ended the year on a very downbeat note, contracting 16.3% yoy last month. Thelarge drag was due to theworstcombination possible: an absence of lumpy items (-98% yoy), decline in pharmaceuticals (-12%) and another month of poor tech (-19%). Altogether they accountedfor 45% of Dec NODX. Due to the unexpectedly bad month, 2012NODX growth was pushed down to 0.5% vs. 11M12’s 2.2%and well outside the lower end of the government’s and our 2-3% forecasts.As global economic fault lines appeared to be contained(for now!)and given the undemanding base, we expect NODX to expand 3-5% in 2013, with the bulk of the recovery coming in 2H13.

Drugs and lumpy items did not do what they had to do. It’s a familiar story, but with a stronger sting: poor non-tech export growth was compounded by weaker tech, causing Dec’s NODX to retreat a sharper-than-expected 16.3% yoy (consensus: -7.6% yoy). Non-tech DX (67% of NODX) declined 14.8% yoy, the worst in nearly four years, on the back of a 5.5% fall in chemicals (-12% fall in drugs) and a 98% yoy plunge in “structure of ships & boats.” For the full-year, non-tech DX expanded 3.0% (11.7% in 2011).

Euben Paracuelles, economist, Nomura

This appears to contradict the improvements seen among other regional exporters partly because of the different product mix in Singapore.
Electronics and non-electronics NODX were both much weaker (-19.1% y-o-y and -14.1%, respectively), with the latter exacerbated by the volatile pharmaceuticals sector and chunky structures of ships & boats. The weakness in electronics was consistent with the signals from the PMI data released earlier. By destination, demand was weak across the board, particularly in the major markets like the US, EU, Japan and Asean.

We expect NODX to remain volatile in the near-term. Non-electronics are likely to rebound, led by pharmaceuticals and oil rig exports .However, base effects will be more unfavourable, particularly in Q1. This is also true for the electronics sector, as we believe some electronics production was shifted to Singapore in the aftermath of the late-2011 floods in Thailand. This is now normalizing with the recovery in Thai output.

Finally, there will be moving holiday effects due to the Chinese New Year occurring in February. Beyond volatility, we expect underlying export growth to remain sub-par this year, with a clearer improvement showing only in the second half of the year. Note that for full- year 2012, NODX growth was 1.2% from 2.8% in 2011, consistent with the global growth slowdown to 3.1% from 4.1%. This year, we forecast global GDP growth at 3.0%.

WEIMING YANG, Premium Client Manager, IG Securities

The monthly improvement of a seasonally adjusted 1.8% rise in non-oil exports was not as strong as had been forecast by Economists, who in a Reuters poll, had expected more than a 6% rise month on month.
 

The contraction in the electronic exports and pharmaceutical shipments were noted as areas of large decline and given that last year’s numbers were boosted by a number of rig deliveries, the 2011 numbers were always going to be tough to beat.
 

The reaction to this disappointing data has been relatively muted in the FX space with the SGD trading basically unchanged.