Surprising 6.6% drop in non-oil exports

Persistently weak electronics shipments and the volatile pharmaceuticals sector dragged down exports last month and renewed fears that Singapore has been slow to hitch on to the global economic recovery.

Non-oil domestic exports fell an unexpected 6.6 per cent in March over a year ago, after rising 8.9 per cent in February.

Exports declined 1 per cent in the year's first three months over the same period last year.

Electronics shipments entered their 20th consecutive month of decline in March, contracting 16.1 per cent, mainly due to lower demand for integrated circuits, computer parts and disk drives.

The traditionally volatile pharmaceuticals sector saw a 44.6 per cent decline in exports, while shipments of aromatic chemicals shrank 43.9 per cent.

Some economists cautioned that the latest numbers are a sign of Singapore's declining export competitiveness, amid restructuring challenges like rising business costs and the tight labour market.

Citi economist Kit Wei Zheng said the downward trend in electronics exports suggests worsening cost competitiveness and "indicates the toll that economic restructuring and possibly the strong Singapore dollar has taken on manufacturing demand thus far".

Others pointed to strong factory output and steadily rising re-exports as indicators that there may be more to last month's downbeat export data.

Barclays economist Leong Wai Ho said the weakness in electronics shipments last month "should not be interpreted as a loss of competitiveness".

He noted that more electronics exports have been classified under re-exports since last year.

Non-oil re-exports - goods exported from Singapore in the same form in which they were imported - surged 18.7 per cent in March, led by a 19 per cent rise in electronics re-exports.

The reclassification would also explain the increasing divergence between electronics factory output and exports that started last year, added Mr Leong.

While the latest export numbers are "certainly very weak", Credit Suisse's Mr Michael Wan said he believes "trade and industrial activity should improve gradually in the second half of this year, led by the widely anticipated recovery in the United States and European Union".

CIMB economist Song Seng Wun said last month's export fall was unsurprising, given sluggish global electronics demand and a high base for non-electronics exports last year.

Mr Allen Ang, Aldon Technologies' group managing director, said its revenue was 15 per cent higher in the first quarter over the same period last year, on the back of strong demand from Japan. The firm refurbishes process kits and parts for flat panel and semiconductor manufacturers. About 40 per cent of its output is exported.

"We're optimistic for the rest of the year, and we definitely expect to do better than last year."

chiaym@sph.com.sg

This article was published on April 18 in The Straits Times.

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