Exports hit by 13% drop in electronics shipments

Exports hit by 13% drop in electronics shipments
PHOTO: Exports hit by 13% drop in electronics shipments

SINGAPORE - Fewer shipments from electronics firms sent Singapore's exports down unexpectedly in May despite signs that factories had been stepping up production in recent months.

Non-oil domestic exports fell 4.6 per cent last month over the same month last year, trade agency IE Singapore said yesterday.

Economists had projected a contraction of just 0.2 per cent, improving from April's 1 per cent dip.

But they were let down by electronics shipments, which fell by a larger-than-expected 13.2 per cent in May over a year ago.

This was largely due to a continued slump in demand for personal computer parts, disk media products and integrated circuits, IE Singapore said.

Non-electronics exports such as pharmaceuticals helped offset this fall, but they rose by only a "marginal" 0.2 per cent, it added.

May's poor export performance was a surprise as the manufacturing sector had seemed to be gaining steam since April, implying that demand - including export demand - was on the rise.

Factories cranked out 4.7 per cent more output in April over a year earlier, while the purchasing managers' index, an early indicator of manufacturing performance, hit a two-year high in May.

The divergence between how much factories are producing and how much they are selling abroad has raised concerns that inventories are building up.

If demand falls short of supply, manufacturers could be stuck with too much inventory and reduce factory activity later this year, economists say.

"It appears that shipments are still lagging production, or that producer confidence has got ahead of actual demand and inventories are rising, notably in the electronics industry," said Barclays economist Joey Chew.

This "could bode badly for electronics production in coming months if final demand, as proxied by these export numbers, does not pick up", said Credit Suisse economist Michael Wan.

On a month-on-month basis, non-oil domestic exports dipped 1.1 per cent in May over April, IE Singapore said.

They had risen 1.1 per cent in April over March.

OCBC economist Selena Ling said the export recovery in Singapore, like in other regional trade hubs, remains challenging "given the tepid demand outlook in many developed economies".

Singapore's non-oil exports to six of its top 10 markets declined last month.

The worst drops were to South Korea, Malaysia and Indonesia, but exports to the United States also turned negative after expanding in April, Ms Ling said.

A silver lining is that exports to Europe seem to be stabilising "as policymakers ease back on fiscal austerity measures", she added.

Another bright spot is Brazil, a key destination for oil rigs, to which shipments surged in May, Ms Chew said.

This suggests the marine engineering sector may be "stirring to life" again after a poor showing in the first quarter this year, she added.

Despite the dip in May, economists say exports are likely to perform better in the second quarter than in the first, giving a boost to economic growth.

Assuming exports stay flat this month from May, they would have improved about 5 per cent in the second quarter from the first quarter, noted Mr Wan.

Adding this to the rise in factory output in April, Singapore's economy should show stronger growth in the second quarter than its 0.2 per cent expansion in the first quarter, he added.


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