Singapore exports rebounded strongly last month, after lacklustre performances in both April and May. But the mood was dampened by fears that the vital electronics sector, which has been a key driver of growth so far this year, could be running out of steam.
Non-oil domestic exports (Nodx) surged by 8.2 per cent in June from a year earlier, easily beating forecasters' expectations of a 5.1 per cent rise, data from International Enterprise Singapore (IE Singapore) showed yesterday.
The surge in shipments was also far better than the revised 0.4 per cent year-on-year gain in May. The flat Nodx performance in April and May snapped five straight months of solid export growth from November last year.
Economists note that trade has regained momentum, but are cautious about the outlook for the rest of the second half of the year. United Overseas Bank economist Francis Tan said: "We do not expect the strong double-digit Nodx growth since November 2016 can be sustained into the second half of 2017. This is especially so since the current electronics cycle may be coming to an end with the rolling out of the next wave of smartphones, likely in the second half of 2017."
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Electronics shipments have now grown for eight straight months, but they expanded by only 5.4 per cent in June from a year earlier. This was sharply weaker than the 28.9 per cent surge recorded in May.
OCBC Bank's head of treasury research and strategy Selena Ling expects electronics exports to continue to grow in the second half of this year, albeit at a slower pace.
Non-electronic exports grew by 9.3 per cent from June last year, reversing the 8.6 per cent decline in May. The increase was largely due to larger shipments for "non-monetary gold, specialised machinery and petrochemicals", IE Singapore noted.
Ms Ling said: "While the petrochemical exports performance is encouraging, the non-monetary gold and machinery exports may be fairly chunky and volatile. As such, we are still looking for a sustained broadening of the Nodx growth drivers beyond electronics."
On a month-on-month, seasonally adjusted basis, Nodx fell by 2.7 per cent in June, after the previous month's 9.4 per cent jump, as the decline in electronics shipments outweighed the increase in non-electronic sales. About $14.5 billion worth of exports were recorded in June, lower than the $14.9 billion in May, IE Singapore said.
Shipments to China, Singapore's top overseas market, charged ahead by 48.9 per cent year on year, outshining even the 39 per cent rise in May. In addition, the jump in exports to South Korea (56.9 per cent) and Japan (26.7 per cent) helped to mitigate the declines to the United States, Taiwan, the European Union, Thailand and Indonesia.
Total trade rose by 7.5 per cent, compared with June last year, on higher import and export growth.
Still, economists remain concerned that the pickup in Singapore's trade growth has not been broad-based and has been driven mainly by electronics.
"The key uncertainty into the second half of 2017 is whether the export recovery spills over into domestic demand. Thus far, monthly data points to tentative but uneven signs of a bottom," noted Citibank economist Kit Wei Zheng.