SINGAPORE’S non-oil domestic exports (NODX) and factory output are closely linked metrics that reflect how key parts of the economy are performing. So far this year, this performance has not been stellar. Weak global demand has dragged down these externally reliant indicators.

However, both figures show signs of improvement in September: still declining year-on-year, but at a slower pace.

Economists expect exports to pick up towards end-2023 and early 2024 – though this will be a gradual and fragile recovery, given continued global uncertainty and tight monetary policy in key markets such as the US and EU.

What is NODX and how is it related to manufacturing output?

Singapore’s exports fall into two categories. Domestic exports are goods made, assembled or processed here. Re-exports are goods that enter and leave in largely the same form, even if they have been sorted, packed and marked up.

Domestic exports are further classified into oil domestic exports and non-oil domestic exports, or NODX.

As Singapore is an export-oriented economy, NODX figures naturally have implications for growth. But they also serve as a barometer for manufacturing because, roughly speaking, our factory output is what gets exported.

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NODX figures reflect the level of overseas demand – and thus the demand faced by local manufacturers, which rely heavily on external rather than domestic buyers.

Why is oil separated from non-oil exports?

Oil is set apart from other domestic exports as it forms a significant chunk – almost a fifth – of overall exports, says Enterprise Singapore (EnterpriseSG). In 2022, Singapore chalked up S$130 billion in oil domestic exports, S$199 billion in NODX and S$380 billion in re-exports.

Once oil is separated, we can get a better sense of how export trends are changing in other sectors. Oil prices also tend to be volatile and less reliable as an indicator of overall economic performance.

NODX data provides a look at how non-oil domestic manufacturing industries are doing, and helps policymakers and businesses make decisions about trade, investment and industrial development.

Why is NODX further split between electronics and non-electronics?

Similarly, electronics are set apart as they form a significant share of Singapore’s total NODX, says EnterpriseSG – roughly a fifth, as shown above. Given this large share, the global electronics demand cycle has a significant influence on overall NODX.

Electronics NODX include disk drives, integrated circuits, personal computers, telecommunications equipment, consumer electronics and circuit components – but not electrical circuit apparatus, nor electrical machinery and apparatus.

For how long has NODX been falling, and why?

September 2022 was the last time NODX grew year-on-year, at 3.1 per cent. Since then, year-on-year growth has been negative each month.

Singapore also tracks monthly seasonally adjusted NODX figures. These show that monthly NODX value has remained below the September 2022 level.

NODX has fallen partly because of a weak global demand for electronics. In September, electronics shipments declined for the 14th straight month, though not as steeply (-11.6 per cent) as the month before (-21.1 per cent). 

Apart from electronics, other sectors with significant declines include non-monetary gold (-59.6 per cent), the typically volatile pharmaceuticals sector (-31.2 per cent) and food preparations (-40 per cent).

We can also look at who is purchasing less. In September, NODX fell year-on-year for seven of our top 10 trading partners. The top markets contributing to the fall were Taiwan (-34.9 per cent), Malaysia (-19.8 per cent) and Indonesia (-45.2 per cent).

South Korea and Thailand, for example, had steeper year-on-year percentage falls. But in absolute terms, Malaysia had a larger year-on-year drop of S$300 million in value.

What about Singapore’s manufacturing output?

Singapore’s manufacturing output constitutes just over a fifth (21.6 per cent in 2022) of gross domestic product (GDP), so it is an important metric to monitor. There are six main sectors:

1. Transport engineering

2. Biomedical manufacturing

3. Chemicals

4. General manufacturing

5. Precision engineering

6. Electronics

In September, manufacturing output shrank year-on-year for the 12th straight month, though less severely (-2.1 per cent) than in August (-11.6 per cent). On a seasonally-adjusted month-on-month basis, output grew 10.7 per cent, rebounding from August’s 10.8 per cent fall.

Singapore’s manufacturing industry relies heavily on overseas demand. In particular, electronics manufacturing is influenced by the global semiconductor market – which has been in a down cycle this year due to a chip glut, after last year’s heightened demand.

However, semiconductor companies expect that the worst is likely to be over, with a revival of demand expected in the coming quarters. In September, the electronics cluster indeed had a stronger showing: up 10.2 per cent year-on-year, in contrast to August’s 18.9 per cent contraction. This included a 13.5 per cent growth in semiconductor output.

How are our declining NODX and manufacturing output expected to affect the economy?

As NODX and manufacturing comprise significant shares of GDP, their performance will naturally affect growth.

In September, the year-on-year fall in NODX eased, ending a five-month trend of deepening decline. Yet even as economists see signs of recovery in the global economy, they describe this as “precarious” and “fragile”.

UOB economists expect negative NODX growth for the rest of the year, while RHB and Maybank economists think it could recover to positive territory near year-end.

This affects whether NODX ends up as a boost or drag to overall economic growth. Oxford Economics’ lead Asia economist Alex Holmes said: “We think exports will be a drag on, or at least provide little support to, GDP growth over Q4 and into 2024.”

As for manufacturing, RHB acting group chief economist Barnabas Gan sees “a material chance” of output growth turning positive by year-end, thanks to China’s gradual recovery and improving global trade.

But even if poor NODX or manufacturing performance erodes full-year growth, the Singapore government still expects the latter to be positive, albeit at the “lower half” of the 0.5 per cent to 1.5 per cent forecast range.

And 2024 should be better. The Monetary Authority of Singapore expects growth in our trading partners to gradually pick up next year, “as inflation continues to ease and the electronics cycle turns up modestly”.