Non-oil domestic exports surged 18.5% y/y in March, sharply exceeding our (+2.1%) and consensus (-1.1%) expectations. On a m/m basis, exports rose 23.0% – the biggest rise since January 2003, and more than paying back February’s 9.4% contraction. The details showed a particularly sharp pickup in exports to Europe, and by product, the strength was broadbased, led by pharmaceuticals, electronics, and petrochemicals. In terms of one-off factors, a big jump is noted in shipments of oil rigs – this alone contributing 8.8pp to growth. Singapore’s exports are notoriously volatile, and hesitate to read too much into a single month’s print – particularly given the weakness in February.However, what it does suggest is that the external sector was not as weak in Q1 as we had initially feared – with exports up on average 4.4% y/y – and that the ‘incipient signs of a turnaround’ in Europe referred to by the MAS in its Monetary Policy Statement earlier this week could continue to support exports in the months ahead. As a result of today’s print, it is likely that Q1 GDP will see an upward revision when the second estimate is released (10-26 May)Singapore is expected to benefit from the broader cyclical pickup – helped by lower oil prices – which should feed through to stronger global demand. The turnaround in Europe in particular should augment the recovery in the US, in turn leading to stronger demand for Singapore’s swing electronics producers.“We continue to expect growth to accelerate modestly in 2015, to 3.4% (government forecast: 2-4%). We viewed the tone of the April MPS as reducing further the risk of an additional policy change in October, and would only expect additional changes to the SGD NEER policy band in the event of a significant darkening in the growth outlook – unlikely, in our view”, Said Barclays in a report on Friday
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