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Singapore manufacturing output down 2.5% in May, dragged down by biomedicals

Excluding biomedical manufacturing, which fell 9.2 per cent, output fell only 0.5 per cent on-year in May, according to EDB data.

SINGAPORE: Manufacturing output in Singapore declined 2.5 per cent on-year in May, mainly due to a slump in the biomedical manufacturing cluster, according to figures released by the Economic Development Board of Singapore (EDB) on Thursday (June 26).

Excluding biomedical manufacturing, which fell 9.2 per cent, overall output fell only 0.5 per cent in May, the EDB said. On a seasonally-adjusted month-on-month basis, manufacturing output contracted 5.7 per cent. However, excluding biomedical manufacturing, overall manufacturing output in fact increased 0.4 per cent.

This is the first contraction since June last year. Economists were expecting to see an expansion instead. But despite the disappointing drop, economists remain upbeat that global growth will to help lift economic activity in the coming months.

"Electronics is actually contracting whether on a sequential basis, or on a year-on-year basis, whereas pharmaceuticals at the output level, is actually doing better than it was doing in Q4 last year," said Mr Vishnu Varathan, economist, Mizuho Bank. "It picked up tremendously in Q1, so there's no big worry about it going through sequential trend based decline."

Mr Edward Lee, the Regional Head of Research for Standard Chartered, noted: "We do have manufacturers moving out. It's part of our restructuring process, so we're bound to see this happen. But if you take a look at some of the PMI numbers that we're getting, it does suggest that whoever is still remaining onshore is still getting the orders. But of course compared to the whole pie last year, we're certainly smaller now. So that's why possibly we're seeing electronics performance being a bit weak compared to other indicators."

The best-performing sector was chemicals, with output rising 8.6 per cent on a year-on-year basis in May. Growth was led by the petrochemicals segment, which rose 14.6 per cent on the back of expanded capacities. The specialties and other chemicals segments grew 11.4 per cent and 5.2 per cent, respectively, boosted by higher regional demand for additives and perfumes and fragrances.

Output of the transport engineering cluster grew 5.6 per cent on-year last month, with the aerospace segment expanding 13.6 per cent, due in part to the low base last year when demand for repair and maintenance jobs from the US and Europe was weak. The marine and offshore engineering segment grew 3.9 per cent, on the back of higher contributions from rig building projects.

Output of the precision engineering cluster grew 0.2 per cent year-on-year in May. The machinery and systems segment recorded a gain of 2.5 per cent on stronger demand for mechanical engineering work and higher exports of lifts and escalators. This was partly offset by the precision modules and components segment, which declined 2.4 per cent due to lower output in electronic connectors and wire per cent cable products.

The general manufacturing industries cluster’s output fell 1.1 per cent in May compared with a year ago. The miscellaneous industries segment grew 1.3 per cent, supported by higher output of batteries and metal doors, windows, grilles and gratings. In contrast, the food, beverages and tobacco and printing segments contracted 3.3 per cent and 4.1 per cent, respectively.

Output of the electronics cluster fell 7.5 per cent year-on-year last month. The infocomms and consumer electronics segment grew 9.1 per cent while the other electronics modules and components segment rose 2 per cent, but semiconductor output decreased 6.4 per cent.

Output in the biomedical manufacturing cluster contracted 9.2 per cent on-year last month, due to a fall in pharmaceuticals output, which fell 11.6 per cent with lower production of active pharmaceutical ingredients.

Looking ahead, economists say they expect industrial production to stabilise at a modest growth rate of between 4 and 6 per cent, buoyed by gradual recovery in developed economies and signs of a pick-up in China.

However, they note that month-to-month variations are to be expected. "There has been some inventory build-up, so there could be episodes of inventory draw-down where we could see industrial production under-performing, or vice versa, depending on what producers are doing, what manufacturers are doing depending on their order book," said Mr Varathan. "So depending on how quickly their order book grows, how confident they become, there could be some shifts, but the bigger picture is that these will converge to moderate growth."

Today's numbers, however, suggest that second-quarter GDP growth this year could shrink 1.5 per cent compared to the previous quarter, but still manage to expand by 2 per cent on a yearly basis.

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