INSTANT VIEW 2-Philippine August exports drop to 8-mth low

MANILA, Oct 10 (Reuters) - Philippine exports fell inAugust, posting the steepest drop and lowest value in eightmonths, the statistics office said on Wednesday, putting morepressure on the central bank to ease its policy rates further tosupport domestic growth.

Electronics and semiconductor shipments, which dominateexports, fell for the fifth straight month in August on weakdemand from big markets like the United States and China.

The latest data brought exports in the first eight months ofthe year to $35.3 billion, up 5.4 percent from a year ago.


KEY POINTSAug 2012 July 2012 Aug 2011Exports $3.80 bln $4.73 bln $4.17 blnyr/yr change (pct) -9.0 6.0 -12.6mth/mth change (pct) -19.7 9.6 -6.4Electronics $1.77 bln $1.68 bln $2.07 blnyr/yr change (pct) -14.9 -25.6 -30.6mth/mth change (pct) 5.4 -11.2 -8.0

NOTE: Some numbers for previous months have been revised.

- Electronics made up 46.5 percent of August export revenues,with woodcrafts and furniture as the second biggest export item,comprising 5.4 percent of total.

- Exports to Japan, the country's top export destination inAugust, rose 4.6 percent from a year earlier.

- Exports to Singapore, the second-biggest market, up 63.6percent from a year earlier.

- Shipments to the United States, the third-biggest market,down 18.7 percent from a year ago.

- Exports to Eastern Asia -- the top export destination byeconomic bloc, accounting for 45.8 percent of total shipments --down 13.7 percent from a year earlier. Southeast Asia and theEuropean Union were the second- and third- biggest economicblocs.



"The numbers today validate our reservations about thefleeting nature of the uptick in electronics exports in previousmonths, some of which could be attributable to lagged effectsfrom the Thai floods amongst other less permanent factors.

"The bigger and more pervasive risk is that of the ongoingrecession in the euro zone, sub-par growth elsewhere in thedeveloped world and soft conditions in China, all of whichsuggest that external growth drivers could be feeble.

"Accordingly, global demand for discretionary electronics isunsurprisingly on the wane, though we anticipate that holidaydemand into the yearend could help stall further decay.

"The core non-farm, non-mining exports is not lookingparticularly bright. This could subtract from GDP, placing theburden of growth on the domestic sector instead.

"The BSP (Bangko Sentral ng Pilipinas) could find itselfdealing with increasing policy tension as soft growth conditionsare juxtaposed against upward price pressures, albeit mostlyfrom the supply-side.

"Nonetheless, we think that the BSP will maintain a dovishpolicy slant."


"Down drift in headline exports, while out of consensus, isnot surprising as support from non-traditional sources will beunable to fully offset the protracted weakness in the coremanufactured product-line, electronics in particular.

"Looking ahead, base effects should nonetheless prop upheadline exports in second half of the year, though will beunder pressure in nominal terms. External sector could remainthe main dampener on overall growth.

"BSP has not shown an inclination to be driven by a weakerexternal sector, as latter plays a relatively small role inoverall growth dynamics. The dataset is unlikely to influencethem, with rhetoric the main factor under watch."


"It is the first time we fell below the $4 billion mark fortotal exports since December of last year. Over the two yearperiod, it is a more than 21 percent contraction.

"We would probably qualify that August was the Habagat(monsoon) month and some degree of disruption must have takenplace to affect the deliveries, so we would expect someimprovement will take place in September.

"Nonetheless, it is a cause for concern and something has tomitigate the soft numbers we are getting from exports in thethird quarter if we are to sustain the 5.5 to 6 percent growthtrajectory of the Philippines.

"The government has to step up both its deficit spending andmonetary policy stance to help sustain the strong performance inthe first half.

"Aside from the headline drop in dollar receipts of 9billion, if you account for the almost 6 percent appreciation ofthe peso year to date, that is going to hurt the exporters evenmore. Even more reason for the BSP to cut policy rates beforethe end of the year."


- Economic Planning Secretary Arsenio Balisacan has saidrising orders from other countries and healthy demand for thePhilippines' agricultural products should offset soft demandfrom traditional markets for its main semiconductor products.

- The economic planning chief has said the country willlikely meet the high-end of its 5 to 6 percent growth as strongdomestic demand will likely compensate for the weakness inexports.

- The Semiconductors and Electronics Industries in thePhilippines Inc cut its export growth forecast this year to 5-7percent from 10-15 percent on slowing demand, although the groupis hopeful of a rebound in orders in the second half aftercurrent inventory cuts stabilise.

- The government has forecast export growth of 10 percentthis year. It has trimmed its import growth forecast to 12percent from 15 percent as manufacturers feel the brunt of theglobal economic slowdown.

- The Philippine central bank kept its key policy rate lastmonth, but economists believe that with inflation under control,it may ease policy further before the year ends to support theeconomy and contain the peso's strength.

- The Philippines provides about 10 percent of the world'ssemiconductor manufacturing services, including for mobile phonechips and micro processors. Semiconductors account for aboutthree-fifths of exports.

- Other top exports include garments and accessories, woodfurniture, vehicle parts, coconut oil, and tropical fruits.


- National Statistics Office website

(Reporting by Erik Dela Cruz; Editing by Rosemarie Francisco)

((karen.lema@thomsonreuters.com)(+632 841-8938)(ReutersMessaging: karen.lema.reuters.com@reuters.net))