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SINGAPORE: Singapore's manufacturing output came in weaker than expected for November. Output declined by more than 8.2 per cent compared to a year ago, against market forecasts for a three per cent increase.
This was caused by a sharp drop in biomedical output. The biomedical sector has largely held up Singapore's manufacturing numbers in recent months.
But output from the sector declined sharply in November, down by as much as 50 per cent, due mainly to maintenance shutdowns of plants and a different product mix. This weighed on the overall manufacturing numbers.
Analysts said despite the drop, they are expecting things to pick up again for the sector.
Alvin Liew, economist, Standard Chartered, said: "Within the manufacturing sector, one of the leaders will probably be still pharmaceuticals - you'll see that the demand for drugs will still remain fairly strong.
"We could be going into a fairly difficult winter in the northern hemisphere as what recent weeks of fairly bad weather is showing. We could see another surge in flu cases, vaccination may not be so widespread yet, so the demand for flu related drugs might be driving the growth for the segment for first half of the year at least."
Month-on-month, manufacturing output dropped by 3.6 per cent in November. While this marks the fourth straight month of contraction, analysts said there are broadening signs of growth.
Recovery in the electronics sector appears to be picking up, with output rising 17.5 per cent on-year. It grew 17 per cent on-year for October and 2.4 per cent on-year for September.
This was driven largely by the semiconductor segment. Semiconductors production jumped 34.2 per cent in November due to a low base in 2008 where demand fell sharply following the onset of the financial crisis.
Another sector showing promising signs is the precision engineering sector. And economists remain positive about the overall outlook.
Selena Ling, head, Treasury Research & Strategy, OCBC Bank, said: "Even though we've had one month of relatively disappointing data, I think the recovery story is still intact. And then given the very low base in the first quarter of this year, we do think that the first quarter of next year, manufacturing should see a very nice year-on-year number.
"The main risk, in my view, is really if you get a premature withdrawal of fiscal or monetary stimulus that has been put in place for this year. Then, of course, the question is whether we're going to see private demand be able to stand on its own legs."
The Singapore economy is seen as having emerged from the recession that began in the third quarter of last year. It is forecast to contract by 2 to 2.5 per cent this year before showing positive growth of as much as three per cent in 2010.
Going into next year, experts believe that the manufacturing sector will play a smaller part towards Singapore's economy. They expect the main drive for growth next year to be financial and tourism-related services.
Ms Ling added: "The key driver for next year will not so much be the manufacturing story because if you look at the developed markets, especially in the G3 economies, demand is still relatively tepid.
"I think the main story for next year will be services growth. We're looking at financial services as well as the tourism-related services - given that the two integrated resorts are due to open next year - to really drive growth as well as employment growth for Singapore next year." - CNA/vm
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