Senior Economist at UOB Group Alvin Liew reviews the latest NODX figures in Singapore during May and their impact on economic growth prospects.

Key Takeaways

Singapore’s non-oil domestic exports (NODX) deteriorated more significantly than expected, further darkening the 2Q economic outlook. NODX plunged by 14.7% y/y in May from -9.8% y/y in Apr, much worse than the Bloomberg median estimate of -7.9% and our less bearish forecast of -5.7% This was the 8th straight month of contraction after 22 months of unabated expansion.

On a seasonally adjusted sequential basis, NODX crashed and tumbled -14.6% m/m in May following two preceding months of gains ( 2.7% m/m in Apr and 18.4% m/m in Mar) and much worse than Bloomberg’s median estimate of 1.9%. The May m/m decline was the sharpest fall since Mar 2012 (-14.7%).

NODX Outlook – The sharper downturn in NODX, with the broad-based weakness in both electronics and non-electronics performance continued to weigh negatively on manufacturing demand for Singapore. The more negative prints on NODX declines to major export destinations region, continued to affirm our cautious outlook and we maintain our call to expect sustained weakness in global demand and that we remain in an electronics downcycle. And while NODX to US stayed positive, we caution against presuming it will persist especially given the sharp moderation of growth in May. The rebound in China’s May NODX is a welcome sign although we are uncertain if it can be sustainable.

The export outlook remains dire and we expect more pronounced y/y NODX contractions for a few more months before improving in the later part of 2H 2023. We now expect NODX to contract by 10% in 2023 (from previous forecast of -5.5%), at the lower end of the government’s NODX forecast range of “-10.0% to -8.0%”. We reiterate there is a substantial risk Singapore may enter a technical recession in 1H 2023, largely driven by the weakness in manufacturing, and today’s NODX plunge adds to that risk.