Singapore: Dark clouds loom over economic outlook in Q2 – UOB

Pablo Piovano FXStreet

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.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.