Singapore May non-oil domestic exports fall 10.5 pct as drugs slump - UPDATE

Non-oil domestic exports in May surprisingly fell 10.5 percent, the sharpest decline since December 2006, to S$12.5 billion from a year ago as pharmaceutical exports tumbled and electronics shipments remained weak, International Enterprise Singapore said Tuesday.

A Thomson IFR poll of economists expected exports to have grown by an average of 5.1 percent last month from a year ago, compared to a revised rise of 5.3 percent in April. Economists had expected stronger pharmaceutical exports to offset weaker demand for electronics.

"It was weaker than expected, but keep in mind that this is due to pharmaceuticals [sector], which is volatile," said David Cohen, economist at Action Economics.

Pharmaceutical exports fell at an annual rate of 48.5 percent in May. Cohen said the slump in pharmaceutical shipments may have more to do with production schedules rather than reflecting a substantial weakening of demand.

Electronics exports continued to disappoint with an 8.5 percent contraction in May, extending their fall for the 16th consecutive month, on falling demand from the United States, a key export market for Singapore.

"It appears that the electronics industry on a global basis is not doing very well. We will probably see the softness extending into the coming months," said Forecast economist Vishnu Varathan.

On a seasonally-adjusted basis, non-oil domestic exports fell 9.8 percent in May from April, reversing the previous month's gain of 1.6 percent. Economists polled by Thomson IFR were expecting a modest growth of 1.0 percent.

Exports to Singapore's biggest markets were weak, with shipments to Europe plunging 28 percent in May and exports to the United States falling by 22.3 percent. Shipments to China also fell 1.5 percent last month.

"Exports to our key markets fell sharply in May.... suggesting that the slower demand from the external markets could now be having an increasingly material impact on the domestic manufacturing sector," said Alvin Liew, economist at Standard Chartered Bank.

"The official growth forecast for non-oil was 2.0 to 4.0 percent for 2008. But with external demand deteriorating as we move in the second half, the risk now is for exports to miss the 2.0 to 4.0 percent mark and, in fact, may even contract this year," said Liew.

($1=S$1.36)