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Singapore's Export Growth Slowed in December, Ending Best Year Since 2003

Singapore’s exports rose at a slower pace in December, ending a year in which shipments jumped the most since 2003 as the global economic recovery boosted demand for the island’s goods.

Non-oil domestic exports climbed 9.4 percent from a year earlier, after a revised 9.9 percent gain in November, the trade promotion agency said in a statement in Singapore today. The median forecast of 14 economists surveyed by Bloomberg News was for an increase of 11.1 percent. Shipments rose about 23 percent in 2010, the most in seven years, according to Bloomberg’s calculation using previously reported data.

Asian economies led a global recovery last year that’s been restrained by sovereign credit woes in Europe and a U.S. job market where unemployment has exceeded 9 percent since May 2009. Prime Minister Lee Hsien Loong’s government expects economic growth to ease this year after a record 14.7 percent expansion in 2010.

“We still maintain the view that Singapore’s export recovery momentum may slow to an anemic pace for some months,” said Alvin Liew, a Singapore-based economist at Standard Chartered Plc. “The export recovery has probably already peaked as inventory restocking was mostly completed in 2010.”

Electronics shipments by companies including Venture Corp., Singapore’s biggest publicly traded electronics contract manufacturer, fell 1.1 percent in December from a year earlier to S$5.2 billion ($4 billion), after a 10.8 percent gain the previous month. It was the first decline in more than a year.

Pharmaceuticals Fall

Non-electronics shipments, which include petrochemicals and pharmaceuticals, gained 16.2 percent. Pharmaceutical shipments dropped 2.8 percent after falling 34.2 percent in November.

The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as Sanofi- Aventis SA can cause industrial output to fluctuate from month to month. Drug companies sometimes shut plants for cleaning before making different products.

Singapore’s non-oil exports rose a seasonally adjusted 8.9 percent last month from November, when they fell a revised 12.8 percent, today’s report showed.

Overseas sales in January and February may be “volatile” as factories in China, which buy components from manufacturers across Asia, typically enter a “lull period” during the Lunar New Year festive period at the start of each year, Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. This year, the celebration begins from the first week of February.

Currency Effect

Still, “recent modest pickups in purchasing managers’ indices of key export markets are pointing to a steady growth pace in exports as global inventory levels and demand are gradually normalizing,” he said.

The Singapore dollar fell 0.2 percent to S$1.2922 against its U.S. counterpart as of 2:07 p.m. local time. The currency has gained about 7.5 percent against the U.S. dollar in the past year, the third-best performer in Asia excluding Japan.

The currency’s appreciation is helping limit imported inflation and its trading band is providing flexibility to cope with capital inflows, central bank Deputy Managing Director Ong Chong Tee said at a conference in Hong Kong today. Singapore’s inflation rate may reach 5 percent in the coming months, he said.

The central bank said in October it would steepen and widen the currency’s trading band while continuing to seek a “modest and gradual appreciation,” after undertaking a one-time revaluation in April. Singapore, which uses the exchange rate rather than a benchmark interest rate as its main tool to manage inflation, guides the local dollar against a basket of currencies within an undisclosed band.

“Inflation remains the main concern,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. The Monetary Authority of Singapore “will have to stay tight, despite the pressure on the export sector,” he said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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