Taiwan reported sluggish export growth in May and a surprising decline in imports that suggest demand in its key markets and the global tech sector may not be so solid.

The trade-reliant economy is hoping that recovering growth momentum in the United States and Europe will help to partly counter a slowdown in its biggest trading partner, China.

However, imports, most of which are components used for re-exports, shrank 2.3 percent in May from a year earlier, Taiwan’s finance ministry said. That was far below the 8.9 percent increase estimated in a Reuters poll of 11 economists.

Exports edged up 1.4 percent in May, missing the average forecast of 4 percent in the poll.

“It looks like our competitiveness isn’t getting much higher in a global context - a few years back we used to register double-digit export growth and that’s dropped off dramatically. Now we’re looking at max trend growth for this sector at about 5 percent,” said analyst Michelle Tsai of Jin Sun Securities, Taipei.

China’s exports gained steam in May thanks to firmer global demand, data showed on Sunday, but an unexpected fall in imports signalled weaker domestic demand that could continue to weigh on the world’s second-largest economy.

Exports to China in May grew 6.4 percent from a year earlier, but those to the United States—Taiwan’s No.2 export market—inched up 1 percent.

Shipments to Europe rose 5.8 percent, while those to Japan grew 2.6 percent.

While mainland China is the top destination, it is also a competitor of Taiwan’s tech exports.

Recent data from the United States points to a firming recovery after a sub-par winter. Growth in the U.S. services sector accelerated in May, with a key index reaching a high not seen since last August, while employment returned to its pre-recession peak in May.

But the euro zone, where growth has been negative or flat for years, is facing fresh fears of deflation, leading the European Central Bank to cut interest rates to record lows last week.

Taiwan’s tech sector has shown mixed readings recently, with smartphone maker HTC posting a 27 percent drop in May sales.

Beleaugured computer vendor Acer Inc managed to swing to a profit in the first quarter, beating expectations of a fourth consecutive net loss.

Forward indicators, however, point to Taiwan gaining from the recovery in global demand with export orders in April edging up to a 15-month high and manufacturing activity showing signs of resilience.

Taiwan’s finance ministry also said it sees export growth in June will be positive year on year due to more working days this year. (Reuters)