May exports slide despite solid electronics shipments

The view of the PSA Tanjong Pagar Terminal.
The view of the PSA Tanjong Pagar Terminal. PHOTO: ST FILE

Some analysts remain upbeat, others fear export rally is tapering off

Singapore's electronics shipments continued to soar last month on strong global demand, but it was not enough to arrest a slide in overall exports.

Non-oil domestic exports slid 1.2 per cent, according to trade agency IE Singapore yesterday. It was the second straight month of contraction after five months of growth.

Economists had, in fact, expected a much steeper 5.6 per cent dip last month because of a high base in the same month a year earlier.

However, even though the data came in better than expected, it still fuels concern that a global export rally that has lifted demand for Singapore's shipments might be tapering off. It is also reinforcing worries that the pick-up in growth has thus far been limited to certain segments of the economy - in particular, electronics manufacturing.

May's export slide came as non-electronics shipments shrank 9 per cent year on year. This outweighed a 23.3 per cent rise in electronics exports, their seventh consecutive month of expansion.

The latest trade data "paints a bullish picture" despite the negative overall number, said Maybank Kim Eng economist Chua Hak Bin, who noted that strong electronics shipments indicate "the tech upswing... appears to be strengthening".

UOB economist Francis Tan also remains optimistic that global trade is picking up, saying: "Non-oil domestic export growth rates are notoriously volatile... (this dip) should not veer us off course in our longer-term view of the recovery in global trade for 2017."

In addition, non-oil re-exports - a proxy for wholesale trade services - surged by 14.3 per cent in May from a year earlier, suggesting that trade-related services are also getting a lift from the broader rebound in regional trade activity, said Citi economist Kit Wei Zheng.

But other economists are more cautious about the outlook and reiterate worries that the stronger economic activity has not been broad-based. "While one can argue that the decline in the headline... figure is due to non-electronics exports' high base, we prefer to see it as another clear sign that the export rally is losing steam. This is consistent with our view that export demand may be peaking," said DBS senior economist Irvin Seah.

"Plainly, while the electronics cluster continues to be the bright spark, the fact that there are marginal spillovers to the rest of the economy remains a concern."

Even those who see global trade recovering warn that growth could ease in the second half of the year.

"This is especially 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 this year," said UOB's Mr Tan.

Yesterday's data also showed that non-oil domestic exports to Singapore's top 10 markets - except for Hong Kong - rose in May. Growth was led by China, South Korea and the European Union.

A version of this article appeared in the print edition of The Straits Times on June 17, 2017, with the headline 'May exports slide despite solid electronics shipments'. Print Edition | Subscribe