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Business trends

Singapore non-oil exports post surprise fall in April, electronics stays strong

SINGAPORE (Nikkei Markets) -- Singapore's core exports declined unexpectedly in April after five straight months of growth, hurt by a sharp decline in the volatile pharmaceutical segment.

However, exports of electronics, which have provided much of the momentum in the past few months, remained strong, prompting economists to view April's performance as a blip.

According to trade agency International Enterprise Singapore, the city-state's non-oil domestic exports fell 0.7% in April from a year ago to a seasonally adjusted 13.6 billion Singapore dollars ($9.75 billion), a reversal from the double-digit expansion seen in February and March.

Wednesday's data came as a surprise since many economists expected the rally in exports to continue. The decline was mainly due to the nearly 40% year-on-year drop in shipments of pharmaceuticals, which can be volatile as production is usually done in batches and marked by extended turnaround times as factories switch from one drug to another.

Exports of electronics remained positive, although the rise of 4.8% in April from a year ago was slightly slower than March's year-on-year expansion of 5.2%.

On a month-on-month seasonally adjusted basis, Singapore's non-oil domestic exports declined by 9.0% in April, following the previous month's 1.1% decrease.

Francis Tan, an economist at United Overseas Bank in Singapore, said the drop in April exports was probably "a temporary, technical pullback from an exceptionally strong month in March."

Growth rates for non-oil domestic exports "are notoriously volatile and a single month...should not veer us off-course in our longer-term view of the recovery in global trade for 2017," he added.

Singapore tracks non-oil domestic 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.

IE Singapore said exports to the EU, Hong Kong, the U.S. and Japan declined, while shipments to Taiwan, South Korea, China, Malaysia, Indonesia and Thailand increased.

Looking ahead, most economists expect exports to return to the growth path in coming months, supported by the continued increase in electronic shipments.

However, the pace could be slower than that in the earlier part of the year as trade numbers reported by other Asian economies have also pointed to a loss of momentum.

For example, Chinese export growth halved last month in dollar terms while the rise in imports was below expectations.

"The trade data suggests that momentum in external demand could be moderating after the step up in the previous two quarters," Citigroup economist Kit Wei Zheng said in a note to client.

He added the data broadly corroborate the Monetary Authority of Singapore's view that the performance in manufacturing outside of electronics will remain "patchy".

The MAS retained its neutral policy stance when it issued its half-yearly monetary policy statement in April. While the central bank noted the turnaround in the semiconductor and precision engineering industries, it said spending on discretionary retail items and other services would be dampened by the subdued labor market and weak consumer sentiment.

Singapore's trade-driven economy quickened towards the end of last year as global demand recovered, boosting exports, and Prime Minister Lee Hsien Loong said recently there was a "good chance" that growth this year could exceed last year's 2%.

Still, jobs remain scarce and Lee warned of a "steady trickle" of redundancies in 2017.

--Kevin Lim

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.

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