* Non-oil domestic exports -4.6 pct y/y in June, below expectations
* Electronics exports -17.4 pct y/y in June after -15.3 pct in May
* Export underperformance may be due to structural issues
(Recasts, adds comment)
By Masayuki Kitano
SINGAPORE, July 17 Singapore's exports fell in June from a year
ago as electronics shipments slumped, adding to fears that economic
restructuring may be eroding local manufacturers' competitiveness.
Singapore's exports of electronics fell 17.4 percent year-on-year in June
after a 15.3 percent decline in May, trade agency International Enterprise
Singapore said on Thursday. That took non-oil domestic exports down 4.6 percent
in June from a year ago - double the 2.3 percent drop forecast in a Reuters
"This reinforces that Singapore's exports are underperforming... Singapore's
exports are among the worst in Asia," said Tim Condon, head of research Asia for
ING Bank in Singapore.
"My conjecture is that this is a structural issue and it's related to the
(government) productivity drive, that some of Singapore's exporters have
relocated to Malaysia," Condon said.
Electronics is a key element of Singapore's exports but the sector is not
well-placed enough in the electronics supply chain to profit much from growth in
smartphones and other recreational tech products.
"If you look at all the figures, it's a broad-based decline in electronics
across all segments. It doesn't look good," said Chua Hak Bin, head of emerging
Asia economics for Bank of America Merrill Lynch in Singapore.
The contraction was in contrast to the solid electronics exports seen from
countries such as South Korea and Malaysia, he said.
"This adds weight to the hypothesis...that restructuring, in particular the
stricter foreign worker policies, may be hurting manufacturing competitiveness,"
Singapore's government has been working to reduce a politically unpopular
reliance on foreign labour as part of a push to increase the economy's
productivity, but the move has led to a tight labour market, putting upward
pressure on wages.
Singapore's unit labour cost index for the whole economy rose to 131.9 in
first quarter 2014 from 125.6 in Q4 2013, the Department of Statistics said. The
manufacturing unit labour cost index was 105.8 in the first quarter from fourth-
quarter 2013's 102.1.
Month-on-month basis, non-oil domestic exports rose a seasonally adjusted
1.5 percent in June, falling well short of a 4.0 percent increase forecast by
the Reuters poll.
While that was an improvement from a 7.5 percent drop in May, the
three-month moving average of the monthly percentage change in exports was
barely positive at 0.8 percent, showing how exports have struggled to gain
traction from one month to the next.
Singapore's non-oil exports also tend to be volatile because a significant
portion comprises pharmaceuticals and oil rigs, whose orders and output can vary
sharply from month to month.
Underscoring such volatility, exports of pharmaceuticals surged 24.3 percent
from a year ago in June, after tumbling 26.3 percent in May.
Many economists had predicted at the start of the year that a recovery in
the United States and European economies would boost Singapore's exports, but
signs of that filtering through have yet to fully materialise.
According to a Bank of America Merrill Lynch estimate, Singapore's non-oil
domestic exports fell 2.3 percent in the first half of 2014 compared to the same
period a year ago.
"What is really unusual is that exports typically tend to do very well and
are very much leveraged to the global growth cycle and yet, they seem to be
ironically going in the inverse direction," said Bank of America Merrill Lynch's
Non-oil domestic exports to the European Union were down 3.9 percent in June
from a year ago, following a 22.6 percent drop in May. Exports to the United
States fell 2.9 percent from a year ago, while shipments to China rose 5.3
The weak export numbers came in the wake of data earlier this week that
showed Singapore's gross domestic product contracted in April-June for the first
time in seven quarters, hit by a sharp drop in manufacturing activity.
(Editing by Eric Meijer)