July 17, 2017 5:44 pm JST

Singapore's exports rebound in June, raising hopes of upward revision to 2Q GDP

SINGAPORE (Nikkei Markets) -- Singapore's core exports recovered in June after flat performances in the preceding two months, indicating the recovery in manufacturing remains intact and that growth in the second quarter may have been stronger than indicated by advance estimates released last week.

However, concerns that the growth in electronics that has propelled Singapore's economy since November could peter out in coming quarters continued to linger. Monday's figures released by trade agency International Enterprise Singapore showed that electronics exports slowed sequentially although the growth for the quarter remained robust.

In all, non-oil domestic exports expanded by 8.2% in June from a year ago to a seasonally adjusted 14.5 billion Singapore dollars ($10.6 billion), accelerating from the revised gain of 0.4% in May and the decline of 0.3% in April, according to data from IE Singapore. The rebound was stronger than expectations.

The trade-dependent city-state shipped more products to China, South Korea, Japan, Malaysia and Hong Kong in June from a year ago, helping offset declines in exports to the U.S., Taiwan, the European Union, Thailand and Indonesia.

Shipments of domestically produced electronics rose 5.4% in June, slowing from May's 28.9% expansion, while non-electronics exports surged 9.3% after two consecutive months of decline.

Meanwhile, non-oil re-exports, or NORX, a proxy for wholesale trade services, rose 9.1% on-year in June after surging 15.0% in May, IE Singapore said.

Kit Wei Zheng, an economist at Citi, described the positive surprise in June trade numbers as encouraging since it came on top of an upward revision in the May data. An upward revision to second quarter gross domestic product growth was also possible, he added.

Semiconductor exports rose 9.7% quarter-on-quarter, accelerating further from the already impressive 7.7% rise in the first quarter of this year, which suggests that the upswing in the technology cycle is intact, he said in a note.

"The acceleration in NORX also suggests that Singapore's services sector continues to benefit from sustained growth in regional trade activities," he said.

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.

Last week the Ministry of Trade and Industry released advance gross domestic product estimates that showed the economy grew 2.5% year-on-year during the April to June quarter, surprising analysts who had expected growth in the region of 2.8% and raising concerns that the recovery could be losing steam.

The advance estimates, which are based primarily on data from the first two months of the quarter, may be revised when a more detailed quarterly economic survey is released in August.

Looking ahead, economists said the key uncertainty about the second half of 2017 is whether the export recovery spills over into domestic demand.

"Thus far, monthly data point to a tentative, but uneven signs of a bottom," said Citi's Kit.

As for electronics, the current cycle may be coming to an end "with the rolling out of the next wave of smartphones likely in 2H 2017," said Francis Tan, an economist at United Overseas Bank.

Although a contraction in electronics exports is not expected in the near term, purchasing managers' index and semiconductor billings "are hinting of some side-way moves in the broader manufacturing output trend," DBS Group Research said.

IE Singapore revised its forecast for non-oil domestic exports in May, saying they are likely to grow by 4% to 6% for the whole of 2017, up from an earlier projection of 0% to 2%.

--Kevin Lim

Asia300

United Overseas Bank Ltd. (Singapore)

Singapore

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