Exports enjoyed a surprising lift last month with growth rocketing to a seven-month high, but trade spats and slowing electronics demand could dampen the mood, say analysts.
Last month's buoyant numbers were largely due to a jump in vo-latile pharmaceutical shipments that helped lift non-oil domestic exports (Nodx) 15.5 per cent over the same month last year.
This followed the 11.8 per cent rise in April, and was also markedly better than the 3 per cent increase predicted by economists.
The rise came as non-electronic exports outweighed sliding electronics shipments, Enterprise Singapore data released yesterday showed.
Electronics shipments declined 7.8 per cent year on year, following a 6.9 per cent decrease in April.
The fall was led by integrated circuits, parts of PCs, diodes and transistors.
Electronics momentum has slowed after a boom last year when export growth hit a seven-year high. Electronics Nodx has fallen every month since last December.
Maybank Kim Eng economist Chua Hak Bin pointed to a puzzling divergence between electronics exports and production, which might be explained by orders booked in Singapore but produced and shipped from abroad.
While electronics Nodx declined 7.6 per cent in the first four months of this year, industrial production surged 17 per cent over the same period, Dr Chua noted.
Non-electronic exports jumped 26.2 per cent last month after a 19.6 per cent increase in April. Civil engineering equipment parts, food preparation and pharmaceuticals were the biggest contributors.
Shipments to five of Singapore's top 10 Nodx markets - South Korea, China, Malaysia, Taiwan and Thailand - decreased compared with May last year.
The top contributors to growth were the European Union, the United States and Japan.
UOB senior economist Alvin Liew said April and May's strong export growth rates are unlikely to be sustained over the rest of the year.
Last month's robust showing was due partly to pharmaceutical exports, which are notoriously volatile, he noted.
In addition, electronics shipments are likely to continue sliding, given last year's high base.
"Escalating US-China trade tensions, and US trade tensions with the rest of the world, are (also) clouding the outlook for a very trade-dependent Singapore," Mr Liew added.
But DBS senior economist Irvin Seah thinks there might be hope yet for exports to stay robust.
Nodx rose 10.3 per cent month-on-month in May, following a 6.3 per cent gain previously, he noted. If this is sustained, another cyclical upswing could be in the works, especially as growth in the US and euro zone has remained firm.
"Stronger global growth will certainly drive Nodx performance, although part of those potential gains could be offset by stiffer tariffs and higher interest rates," added Mr Seah. "It could be a rough ride ahead and things are more likely to turn sideways rather than to continue heading up.
"It won't be picture perfect, but one can take comfort with the fact that it is certainly a brighter one compared with two years back."