Why January NODX's 3.3% drop is just a downside blip

Pullback is expected, says anlayst.

According to DBS, January's non-oil domestic exports fell by 3.3% YoY (Consensus: -1.2%, DBS: -2.3%). While the decline has been sharper than thought, this pullback is expected.

According to DBS senior economist Irvin Seah, though it looks peculiar that NODX will worsen despite the strong showing in Jan13 PMI numbers and improving global economic conditions, it pays to note that this month’s decline has more to do with short term seasonal factors rather than underlying fundamentals.

Plainly, the Chinese New Year lull has suppressed export performance, which has been manifested in the hard NODX numbers. In contrast, the pick-up in PMIs (50.5 in Jan, up from 49.7 in Dec) reflects the general optimism for manufacturers as they look beyond the near term seasonal lull. That’s sentiment driven and more forward looking.

So, January’s NODX is nothing more than a downside blip. It doesn’t imply a worsening in global demand or impending risk ahead. Instead, look to a fairly healthy export performance in the coming months, which will come on the back of the improving economic conditions.

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