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

MANILA, Oct 10 (Reuters) - Philippine exports fell in August, posting the steepest drop and lowest value in eight months, the statistics office said on Wednesday, putting more pressure on the central bank to ease its policy rates further to support domestic growth.

Electronics and semiconductor shipments, which dominate exports, fell for the fifth straight month in August on weak demand from big markets like the United States and China.

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


KEY POINTS Aug 2012 July 2012 Aug 2011 Exports $3.80 bln $4.73 bln $4.17 bln yr/yr change (pct) -9.0 6.0 -12.6 mth/mth change (pct) -19.7 9.6 -6.4 Electronics $1.77 bln $1.68 bln $2.07 bln yr/yr change (pct) -14.9 -25.6 -30.6 mth/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 in August, rose 4.6 percent from a year earlier.

- Exports to Singapore, the second-biggest market, up 63.6 percent 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 by economic bloc, accounting for 45.8 percent of total shipments -- down 13.7 percent from a year earlier. Southeast Asia and the European Union were the second- and third- biggest economic blocs.



"The numbers today validate our reservations about the fleeting nature of the uptick in electronics exports in previous months, some of which could be attributable to lagged effects from the Thai floods amongst other less permanent factors.

"The bigger and more pervasive risk is that of the ongoing recession in the euro zone, sub-par growth elsewhere in the developed world and soft conditions in China, all of which suggest that external growth drivers could be feeble.

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

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

"The BSP (Bangko Sentral ng Pilipinas) could find itself dealing with increasing policy tension as soft growth conditions are juxtaposed against upward price pressures, albeit mostly from the supply-side.

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


"Down drift in headline exports, while out of consensus, is not surprising as support from non-traditional sources will be unable to fully offset the protracted weakness in the core manufactured product-line, electronics in particular.

"Looking ahead, base effects should nonetheless prop up headline exports in second half of the year, though will be under pressure in nominal terms. External sector could remain the main dampener on overall growth.

"BSP has not shown an inclination to be driven by a weaker external sector, as latter plays a relatively small role in overall growth dynamics. The dataset is unlikely to influence them, with rhetoric the main factor under watch."


"It is the first time we fell below the $4 billion mark for total exports since December of last year. Over the two year period, 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 taken place to affect the deliveries, so we would expect some improvement will take place in September.

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

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

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


- Economic Planning Secretary Arsenio Balisacan has said rising orders from other countries and healthy demand for the Philippines' agricultural products should offset soft demand from traditional markets for its main semiconductor products.

- The economic planning chief has said the country will likely meet the high-end of its 5 to 6 percent growth as strong domestic demand will likely compensate for the weakness in exports.

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

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

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

- The Philippines provides about 10 percent of the world's semiconductor manufacturing services, including for mobile phone chips and micro processors. Semiconductors account for about three-fifths of exports.

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


- National Statistics Office website

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

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