SINGAPORE (Nikkei Markets) -- Singapore's core exports grew slightly below expectations in July but shipments of electronics accelerated, bolstering the outlook for the year.
According to data from trade agency International Enterprise Singapore released Thursday, non-oil domestic exports, or NODX, expanded by 8.5% in July from a year ago, slower than June's 8.8% pace. Most economists estimated key exports to grow 9.1% in July.
Electronics remained a star performer with shipments rising 16.3% year-on-year in July, much faster than June's 5.4% gain. Integrated circuits, PC parts and disk media products contributed most to the rise, IE said.
However, non-electronic exports grew just 5.2% on-year in the month, compared with a 10.1% rise in June, damped by pharmaceuticals.
According to brokerage Maybank Kim Eng, pharmaceutical shipments hit an eight-year low after plunging 54% on-year in July, hurting exports to the European Union.
On a month-on-month seasonally adjusted basis, core exports shrank 2.5% to total 14.2 billion Singapore dollars ($10.4 billion) in July, following June's 2.2% decline.
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.
"Exports and trade continue to drive the growth recovery, with early signs that the momentum is holding up well in the third quarter," Maybank's Chua Hak Bin and Lee Ju Ye wrote in a report following Thursday's data. "Electronics exports and re-export trade appear to be strengthening, not waning," they added.
Shipments to most major markets grew in July. Those to China, Singapore's biggest market, rose 21% on-year while shipments to Thailand surged 55% and those to South Korea rose 45%. However, exports to the EU tumbled 22% on-year, worse than the 3.3% fall in June, while shipments to the U.S. fell 5.9% after staying flat the previous month.
Singapore's trade-driven economy, in particular its electronics and precision engineering sector, has benefited in recent months from the growing demand for semiconductor manufacturing equipment.
Gross domestic product grew 2.9% in the second quarter, the government said last week, above its initial estimate of 2.5%. Economists pointed to the strong growth in services as evidence that the benefits of the trade-driven recovery were beginning to flow to other areas of the economy.
Meanwhile, IE Singapore has narrowed its forecast range for non-oil exports growth this year to 5%-6% from 4%-6% earlier.
Thursday's data showed non-oil re-exports, or NORX, a proxy for wholesale trade services, rose 17.5% on-year in July, after the 8.3% expansion in June. Shipments of both electronic and non-electronic re-exports increased, IE Singapore said.
Looking ahead, economists expect external demand to support growth although United Overseas Bank warns that the current electronics cycle could be coming to an end with the rolling out of the next wave of smartphones, likely in the second half. Moreover, the expected slower growth in China could pose some risks to Singapore's NODX growth in the months ahead, the bank said in a report.
Maybank's Chua and Lee see strength in exports continuing in the third quarter and a moderation in the last two months of the year due to the high base effect. They expect GDP growth above 3% in the third quarter and forecast full-year growth at 3%.