Singapore June exports up 3.2 pct on May, but worries persist

SINGAPORE - Singapore's non-oil exports rose a seasonally adjusted 3.2 percent in June, roughly in line with expectations, but weakness in its key electronics sector suggests the recent improvement in factory output may not be sustainable and could weigh on growth.

The monthly rise was slightly above the median forecast for a gain of 2.2 percent in a Reuters poll of analysts, but did little to allay concerns about prospects for manufacturers.

Retained imports of intermediate goods and total trade both fell in June from May on a seasonally adjusted basis, according to data from trade body International Enterprises Singapore.

"We've been seeing exports of electronics lag behind production since March. There is going to be a pullback in production, probably as early as this month," said Barclays economist Joey Chew.

"We think the preliminary GDP growth number will be revised down to about 12.5 percent quarter-on-quarter," she added, referring to advance estimates that showed the Singapore economy expanded by a seasonally adjusted and annualised pace of 15.2 percent in the April to June period from the preceding quarter.

Singapore exports most of what it produces and the manufacturing sector accounts for about 20 percent of the city-state's gross domestic product.

Non-oil exports in June declined by 8.8 percent from a year earlier, hurt by a 12.4 year-on-year decline in electronics shipments and a 35.4 percent year-on-year plunge in pharmaceuticals, which tend to be very volatile.

Singapore does not provide seasonally adjusted month-on-month changes in exports by product category, but IE Singapore's data showed domestic exports of electronics fell to S$4.47 billion in June from S$4.61 billion in May. Pharmaceutical shipments declined to S$1.61 billion from S$1.99 billion in May, the data showed.

Song Seng Wun, regional economist at CIMB, viewed the June trade data more positively, noting the rate of contraction in exports has been narrowing if the volatile pharmaceuticals data was excluded.

Singapore's economy grew the most in over two years in the second quarter, according to advanced estimates released last Friday.

The recovery was led by manufacturing, which expanded by an annualised and seasonally adjusted 37.6 percent, turning around from a decline of 12.7 percent in the first quarter.

Most economists remained wary about the outlook for the city-state and the rest of Asia due to the slowdown in China and continued weakness in Europe.

Singapore's exports tend to be unpredictable because a significant portion involves inputs for pharmaceuticals and oil rigs that can vary sharply from month to month.