EXPORTS dived in August in one of the worst performances for nearly a year, sparking fears that the economy is sliding into recession.

Non-oil domestic exports fell 10.6 per cent last month compared with August last year, reversing the 5.7 per cent year-on-year growth in July.

The August number shocked economists and was the worst since last October when non-oil domestic shipments fell 16.3 per cent compared with the same period a year earlier.

The main concern over last month's dismal figure is that the falls were broad-based, with electronics and pharmaceuticals both plunging sharply, noted OCBC economist Selena Ling.

Electronic exports fell 11 per cent last month compared with August last year while non-electronic exports dropped 10.4 per cent, said trade agency IE Singapore, which released the numbers yesterday.

Analysts had tipped exports to fall by 4 per cent and so were caught off-guard by the surprisingly sharp decline.

Many economists now believe the soft export numbers are pointing to the economy falling into a technical recession, defined as two consecutive quarters of contraction. The economy contracted 0.7 per cent in the April to June period compared with the first three months of the year.

And this quarter could see another contraction, said Citigroup economist Kit Wei Zheng, who believes that there is now a "high chance" of a technical recession.

"The weak data materially raises the odds of a technical recession," he said, adding that confirmation could come as early as this month when the manufacturing and industrial production data for last month is released.

The main reasons for the weak exports are not hard to find: Continuing economic malaise in Europe and slowing growth in China.

Exports to Europe tumbled 28.7 per cent while shipments to China dipped 4.4 per cent.

Barclays Capital economist Leong Wai Ho believes a rebound could happen next month on the back of new products like the latest iPhone 5 and the Windows 8 phone due out later this year.

The latest set of export figures comes after a string of disappointing retail and factory activity data. Retail sales fell 2.9 per cent in July compared with a year ago while the purchasing manager's index fell for two consecutive months last month.

The weakening economy could further tilt the balance for the Monetary Authority of Singapore (MAS) when it sets its exchange rate policy next month.

Most analysts expect MAS to tweak its policy, which it uses to balance between inflation and growth, by allowing the Sing dollar to appreciate at a slower pace.

Inflation fell to a 20-month low of 4 per cent in July and is expected to fall further towards the end of the year.

aaronl@sph.com.sg