Singapore's non-oil exports unexpectedly fell in July as trade dropped sharply with its biggest markets the United States and Europe, providing evidence the global economic slowdown is hitting Asia's exporters. July's 2.2 percent fall in non-oil exports after seasonal adjustments from June compared with market expectations for a 3.4 percent rise, and followed a 4.2 percent gain in June, data showed on Monday.
The small Southeast Asian country is heavily dependent on external demand and faces the prospect of a prolonged downturn as that demand dries up on the back of a slowing global economy.
Singapore's government has cut its forecasts for economic growth and exports, and raised its inflation outlook for the year. This has prompted some economists to predict a technical recession after the economy contracted in the second quarter. "The fall (in non-oil domestic exports) will translate into weaker manufacturing activity, at least for the third quarter, raising the likelihood of a technical recession in 2008," said Alvin Liew at Standard Chartered.
Non-oil exports were worth about 70 percent of gross domestic product last year. July non-oil exports to the United States and the European Union, which make up nearly a quarter of exports, fell 33 percent and 27 percent respectively from a year earlier (for a table see [ID:nSP158697].
"The soft figure was a reflection of the spluttering of global demand," said David Cohen of consultancy Action Economics. "The slowing in global growth will weigh on Singapore's economic performance and will be another source of softness for the Singapore dollar in the near term."
The Singapore dollar, the central bank's main monetary policy tool, stood at 1.4116 to the US dollar by 0620 GMT, little changed from before the data. It hit a six-month low on Friday after sliding from a record high in July.
Non-oil exports in July fell 5.7 percent from a year earlier - the third straight month of contraction - to S$13.7 billion ($9.7 billion). That compared with a revised 10.6 percent decline in June, and with a median forecast in a Reuters poll of a 5.3 percent drop.
The official forecast is for exports to shrink by 2-4 percent this year rather than to grow at that pace as was previously expected. This would be the first decline in annual exports since 2001. "The underlying trend will be of a steady decline or somewhat of a worsening of trade on a year-on-year basis. The decline may not occur in a straight line - you may see some volatility on a month to month basis," said Kit Wei Zheng, an economist at Citigroup.
July electronics shipments fell by 14.2 percent from a year ago while drugs exports fell 42.4 percent in the same period. Petrochemicals climbed 26.5 percent, trade promotion agency International Enterprise Singapore said in a statement.
Singapore's non-oil domestic exports, which comprise of goods that have been manufactured in Singapore or undergone further processing, include mobile phones, medical instruments, and active ingredients for some blockbuster drugs.
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