June 16, 2017 5:41 pm JST

Singapore's exports fall for 2nd straight month in May, non-electronics weaken

Optimism intact due to base effect, strength in electronics

SINGAPORE (Nikkei Markets) -- Singapore's non-oil domestic exports dropped for the second straight month in May as weakness in sectors such as pharmaceuticals continued, failing to offset the robust growth in electronics.

The high level of exports in the same month a year ago also played a part in muting May's data by comparison, prompting analysts to say that the outlook remains optimistic.

Trade agency International Enterprise Singapore said Friday the city-state's non-oil domestic exports, or NODX, fell 1.2% year-on-year in May to a seasonally adjusted 14.6 billion Singapore dollars ($10.53 billion). This was despite another strong performance by the electronics sector, which saw shipments surge 23.3% year-on-year.

The decline reflected "the decrease in non-electronic NODX off the high base a year ago, while electronic NODX grew for the seventh month," IE Singapore said in a news release.

Following five straight months of growth, exports declined 0.8% in April this year, hurt by a sharp deterioration in the volatile pharmaceutical segment.

Analysts noted that on a seasonally adjusted month-on-month basis, non-oil domestic exports rose 8.1% in May, reversing course after the previous month's 9.0% decrease.

Francis Tan, an economist at United Overseas Bank, said that while the two consecutive months of on-year contraction may seem alarming, the drop was probably only temporary.

"NODX growth rates are notoriously volatile and a single month of technical pullback should not veer us off course in our longer-term view of the recovery in global trade for 2017," Tan said. However, the bank does not expect the strong double-digit growth in exports since November 2016 to be sustained in the second half of 2017, Tan wrote in a note to clients.

Singapore tracks non-oil exports as they provide a better gauge of economic activity. This is because prices of refined oil products tend to be volatile, while total exports include the billions of dollars of goods produced elsewhere that are shipped through Singapore's mega container port.

Chua Hak Bin, an economist at brokerage firm Maybank Kim Eng, said that the trade data for May painted a bullish picture for the Singapore economy despite the negative headline print for non-oil domestic exports.

Arguing that electronics served as a more reliable gauge of global demand, Chua noted that the on-year expansion in May's electronics shipments was much faster than April's 4.8%.

"The tech upswing is not showing any signs of moderating and appears to be strengthening," he said.

He added that non-oil re-exports, a proxy for wholesale trade services, gained 14.3% from a year ago in May after declining by 0.3% in April, pointing to stronger wholesale trade services growth in the second quarter.

According to IE Singapore, non-electronic non-oil exports decreased by 9.0% in May 2017, after the 2.9% decline in the previous month. Civil engineering equipment parts, non-monetary gold and pharmaceuticals contributed the most to the decline.

Maybank's Chua said the May 2016 export figures were unusually high as non-monetary gold exports surged more than five-fold that month.

In terms of markets, non-oil exports to nine of the city-state's 10 largest destinations, which include the European Union, the U.S. and China, rose. The only area to record a fall was Hong Kong - shipments there fell 2.0% from a year ago.

Singapore's economic growth is expected to quicken to 2.5% this year from last year's 2.0%, led by a surge in manufacturing even as other sectors remain subdued, according to the Monetary Authority of Singapore's latest quarterly survey of professional forecasters released earlier this week.

The forecasts came after the city-state reported a slightly better-than-expected 2.7% expansion in the first quarter from a year ago.

However, the securities arm of DBS Group Holdings, Singapore's largest lender, has downgraded the city-state's equities to neutral from overweight, noting that growth has moderated while the recovery in both services and manufacturing continues to be uneven.

--Kevin Lim

Asia300

United Overseas Bank Ltd. (Singapore)

Singapore

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