Singapore Exports Shrink Again

Singapore’s exports shrank for a second straight month in May, though electronics shipments continued to grow solidly to support an economy that wobbled in the first quarter and faces risks from deleveraging in major trading partner China.

Non-oil domestic exports from the city-state dropped 1.2% in May from a year earlier, data from trade agency International Enterprise Singapore showed on Friday, after declining 0.7% in April for the first time in five months, Reuters reported.

Analysts, who had expected a 3.7% year-on-year decline last month, attributed the latest fall to the high base effect in the year-ago period when exports jumped a revised 14%.

“Last May was a very high base,” Selena Ling, head of treasury research & strategy at OCBC Bank said, adding: “These will skew the numbers somewhat.” On the plus side, the electronics sector—a key support for the economy with solid shipments in recent months—continued to show strong growth in May, jumping 23.3% from the year before. There is greater optimism that the electronics uptick is going to last a little bit longer; it’s not a flash in the pan kind of story,” Ling said.

Moreover, on a seasonally adjusted month-on-month basis, Singapore’s exports grew 8.1% last month, turning around from the 9% contraction in April.

Singapore’s economy has struggled over the past two years. In the first quarter of this year, it shrank 1.3% from the previous three months and grew 2.7% from a year earlier.

The robust electronic exports in the last few months provided a cushion for the trade-dependent economy, prompting economists to raise their forecasts for Singapore’s growth this year.

Ling, however, warned about risks in China and the potential ripple effects down the global supply-chain. “In terms of headline growth, we see a sharper slowdown in the second half because of the deleveraging and regulatory concerns that is going there (China),” she said.

The city-state’s central bank held its policy steady in April but warned of risks to the global outlook, including from a potentially sharper credit squeeze in China, Brexit and US economic policy.