Tech cycle effects add burden on NODX in August

Electronics could contract for the ninth consecutive month after a 3.8% drop in July.

After an 11.8% gain in July, the growth in Singapore’s non-oil domestic exports for August could soften to 5.3%, Moody’s Analytics revealed.

“Electronics likely remained a drag, with annual export growth forecast to contract for a ninth straight month in August,” said Moody’s Analytics managing director Steve Cochrane. Electronic products were down by 3.8% in July, following the 8.6% drop in June.

“The global tech cycle has passed its peak, but the annual contraction is overstating the slowdown on high base effects,” Cochrane said.

The weakness in Singapore’s electronics sector was brought about not only by the tech cycle but also the effects of the trade war. No thanks to the effect of global downturns, the contribution of the NODX to Singapore’s GDP has fallen from 70% in 2006 to a mere 40% in 2018.

“Nonelectronic exports are lifting the headline, with pharmaceuticals and food preparations likely remaining bright spots,” Cochrane added. In July, these categories were up 109.2% YoY and 120.4% YoY, respectively.

However, analysts have previously indicated that pharmaceuticals remains a volatile segment. “Whilst pharmaceuticals are a growing share in the export ledger, tech products remain larger and are less volatile,” Cochrane said.

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