SINGAPORE (Nikkei Markets) — Shipments of electronic items continued to decline but other parts of Singapore’s export engine accelerated in April, lifting the month’s performance well above expectations.
However, the outlook for the trade-driven economy was little changed, with economists pointing to the risks from a slowdown in the technology sector as well as any escalation in the trade tensions between the U.S. and China, which is Singapore’s largest market.
The surge in shipments of pharmaceuticals, a volatile segment that helped boost non-electronics exports, also limited reassessment. Francis Tan, an economist with United Overseas Bank, said he was cautious about interpreting the figure as the expansion was due to a very low base in the same month the previous year.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said in a report that the positive headline export figure was somewhat misleading, as the reading on electronics exports remains “rather grim.”
Overall, non-oil domestic exports grew 11.8% year-on-year in April, recovering from a two-month decline, data from Enterprise Singapore showed. Most expectations ranged around 7%.
Singapore reports non-oil domestic exports as these 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 of electronics fell 6.9% in April, the fifth consecutive month of decline, while non-electronic exports expanded 19.6%. Pharmaceutical shipments rose 44%; those of non-monetary gold, which excludes gold held as a reserve asset, surged 85%. Food items also improved.
On a month-on-month seasonally adjusted basis, exports grew 6.5% in April, after the previous month’s revised 3.2% decline.
UOB’s Tan said the data confirmed his view that high-base effects have started to kick in. The bank maintained its forecast for exports to grow at a slower pace of 6.5% this year as compared to 8.8% last year.
The Singapore economy has flourished over the past few quarters, thanks to an electronics boom that has benefited manufacturers. In 2017, gross domestic product grew 3.6%, the fastest pace in three years.
While growth has begun to moderate, the outlook is still robust.
In April, the Monetary Authority of Singapore tightened policy for the first time in six years and said it expected growth “slightly above the middle” of its 1.5%-3.5% forecast range for this year.
So far, the trade-tensions between the U.S. and China appear to have had little impact. Based on the latest exports data, demand from Singapore’s major markets, including China, the European Union and the U.S., rose in April. Shipments to Taiwan, South Korea, Malaysia and Hong Kong fell.
However, a slowdown in China remains a risk. While exports and imports by that country were robust in April, other data, including investment and retail and home sales, suggested weakness.
In April, shipments of personal computer parts from Singapore plunged 43%. Those of integrated circuits and diodes and transistors also fell.
According to Maybank, the protracted soft patch in electronics exports suggests manufacturing growth in the city-state could cool to the lower single-digits in the second quarter. Services will probably be more resilient and contribute a greater proportion of growth for the rest of the year, Maybank said, while keeping its GDP growth forecast at 3.1% for this year.