Has Singapore's manufacturing sector already peaked in Q1?

Electronics exports shrank by 6.9% and marked their fifth month of decline.

Singapore’s non oil domestic exports (NODX) rebounded 11.8% YoY in April following two consecutive months of decline. However, analysts are bearish as the recovery was led by the volatile pharmaceuticals (+43.7%) sector and petrochemicals (+15.1%). Electronic exports continued to contract (-6.9%) and marked their fifth month of decline.

"The positive headline export figure is somewhat misleading, as the reading on electronic exports remains rather grim," said Maybank Kim Eng analyst Chua Hak Bin. "The protracted soft patch in electronic exports suggests that manufacturing growth will likely cool off to the lower single digits in the second quarter."

Chua noted that the "puzzling divergence" in electronics exports and production could be in part because orders, whilst being booked in Singapore, are produced and shipped from outside Singapore (e.g. Penang). "Electronics production, for example, expanded +12.4% in March, even though electronics exports contracted 7.5% that same month," he added.

The analyst also said that the ongoing US-China trade noises may be dampening business sentiments, whilst the smartphone demand cycle is fading.

J.P. Morgan economist Benjamin Shatil concurred with Chua and said, "The recent soft patch in tech likely reflects the combination of a slowing smartphone cycle and easing in capex demand earlier this quarter, which have depressed electronics production and exports over the past couple of months."

According to him, tech leading the sequential trend of declines. "In recent years, demand for Singapore’s tech has followed that of Taiwan with a lag of three to four months; the recent data imply continued softening through mid-year, with stabilization expected thereafter," he added.