Electronics weakness clouds exports rebound

EXPORTS of made-in-Singapore goods jumped 11.1 per cent last month over the same period last year, beating forecasts and reversing December's sharp decline of more than 14 per cent.

The strong turnaround in non-oil domestic exports (Nodx) growth was more than double the median market forecast of 5 per cent in a survey of analysts by Bloomberg.

Driving the expansion was a 45 per cent surge in shipments to the United States, and a 25 per cent rise in those bound for China, according to monthly figures released by trade promotion agency IE Singapore yesterday.

But the rebound left some analysts unimpressed.

The January recovery 'masks the weakness in electronics', a sector which makes up half of Nodx, said United Overseas Bank economist Alvin Liew.

What drove up last month's export numbers were petrochemicals and drug shipments, he noted. The latter is given to wild swings from month to month.

Pharmaceuticals grew 12.6 per cent, while petrochemicals surged by more than 26.4 per cent, leading to a 18.8 per cent jump in non-electronics Nodx.

But the crucial electronics segment grew just 2.1 per cent.

And even this modest improvement in electronics was not greatly aided by growth in sales of semiconductor chips - the industry's main money-spinner.

Chip shipments were only 0.5 per cent higher from a year earlier.

Rather, a bigger element of the improvement came because exports of disk drives - an industry probably seeing the final effects of last year's plant closures - fell less steeply last month.

A slump in global technology demand and consolidation of the disk drive industry had plagued electronics exports, which fell 19.3 per cent last December.

The electronics slump may not be over, noted Citigroup economist Chua Hak Bin, as non-oil retained imports of intermediate goods fell for the sixth consecutive month, dipping 6.6 per cent last month.

This figure refers to imports of manufacturing inputs such as chip components, which are an important indicator of future production and exports.

There is another factor to explain why this month's export growth is likely to be sluggish. Chinese New Year public holidays fell in January last year, but are in February this year.

That gave last month three extra working days over January last year, partly contributing to the latest rebound, reported IE Singapore.

But it also means that last February's strong electronics performance is unlikely to be outdone this month, said Dr Chua.

'The high base and timing of Chinese New Year this year suggests that electronics export growth will likely turn negative again this month on fewer working days,' he predicted.

Singapore-made exports had a mixed showing among the country's top 10 Nodx markets last month.

Nodx to America improved spectacularly, with sales of telecommunications equipment up more than 400 per cent while shipments of drugs more than trebled.

Exports to Malaysia, the US and China reversed last December's single-digit declines to stage double- digit growth last month. But shipments to another four of the top 10 destinations fell.

These markets are Japan, Indonesia, Taiwan and the No. 1 market - the European Union's (EU's) 27 member states. Singapore sold less drugs and telecoms equipment to the EU while the decline in Japan-bound Nodx was partly due to lower sales of semiconductor chips.

Overall trade with the world expanded by 14 per cent to hit $68 billion last month, reported IE Singapore.

This was boosted by faster growth in imports as well as the recovery in exports.

Oil domestic exports from Singapore, a major oil refining centre, also climbed 5.5 per cent last month, after sliding 16 per cent the previous month. This was mainly due to significantly higher sales to Indonesia, Australia and China.

With technology demand expected to bottom out only in the second or third quarter this year, analysts expect non-electronics to drive Nodx growth for the time being.

'We expect demand for pharmaceutical exports to remain intact, especially to key European export destinations, although the sector is unlikely to replicate its sterling 2006 performance,' said Mr Liew.

ericatay@sph.com.sg