The declinemarks the first time since the 2001 dot.com crash that exports have slumped for three straight months.

While the July figure almost halved the rate of decline recorded in the earlier two months, economists say the weak global economy presents more dark clouds for local manufacturers, which ship most of their wares overseas.

'The export weakness is likely to translate into weaker manufacturing activity in the third quarter, and we maintain the likelihood of seeing a technical recession this year,' said Standard Chartered Bank economist Alvin Liew, who added that exports for the full year could contract beyond the official forecast range of 2 to 4 per cent.

An economy goes into a technical recession if it shrinks for two straight months on a month-on-month basis.

Despite positive growth of sales to China, Indonesia and other emerging economies, non-oil domestic exports stayed in negative territory last month as sales to the US fell 33 per cent, while those to Europe sank 27 per cent.

The July number was slightly worse than expected, going by a median estimate of a 5 per cent contraction by nine economists polled by Bloomberg News.

Consumers in America and Europe are cutting back on spending as jobs are lost and wages slashed amid a worsening global economic slump.

This is reflected most clearly by the poor overseas sales of locally made electronic goods, which have been sliding for the past 18 months.

Last month, Europe-bound shipments of Singapore-made disk drives and semiconductor parts halved, while those of telecom equipment dived 70 per cent. Exports to the US did just as badly, with computer parts falling 47 per cent and consumer electronics down 84 per cent.

'The underlying trend in electronics exports is clearly pointing south,' said HSBC economist Prakriti Sofat, who noted that while manufacuting output data has thus far been less gloomy, inventories might be being built up. 'It's hard to be optimistic for this sector.'

Pharmaceutical exports, while less likely to be buffetted by short-term economic cycles, also fell sharply by 42 per cent, making it eight months of decline out of the past nine months.

Industry-specific production cycles are taking their toll, while the Government recently said that generic drugs are challenging the global pharmaceutical giants that operate plants here.

'Pharmaceutical exports were down for the fifth consecutive month - the longest spate of negative readings in the five-year history of the series,' said Ms Sofat.