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SINGAPORE: Growth in Singapore's manufacturing output slowed significantly in July, dragged down by the volatile biomedical cluster.
Data released Thursday by the Economic Development Board (EDB) showed that last month's output rose by 9.9 per cent on-year, the slowest growth in eight months.
July's figure is much lower than the 29.5 per cent year-on-year growth witnessed in June.
But it is still better than market forecasts for a 6.3 per cent on-year growth.
Excluding the biomedical manufacturing cluster, EDB said the output would have grown by 20.2 per cent on-year.
The biomedical manufacturing cluster's output declined 11.2 per cent on-year, its first on-year fall this year.
EDB said the poorer showing was due to a different product mix and plant shutdowns, and the months ahead could be worse.
Selena Ling, Head of Treasury Research & Strategy at OCBC Bank, said: "It's quite likely that we'll get a couple of months of negative growth, depending on the plant shutdowns and how long they actually last...If you look in terms of final demand coming out from Europe for instance, obviously, (with) the fiscal austerity that's taking place there, we do expect that healthcare demand in that sense will also be impacted."
The top performer in July was the precision engineering cluster, which expanded 50.9 per cent on-year, boosted by the machinery & systems segment.
EDB said higher export orders for semiconductor related equipment as well as the ramp-up of production in new plants helped the cluster.
The electronics sector continued to do well, with output up by 24.5 per cent on-year due to healthy demand.
Compared to the previous month, industrial output rose by 1.4 per cent in July, better than the 22 per cent month-on-month contraction seen in June.
For the first seven months this year, manufacturing output expanded 36.6 per cent.
Experts warned that growth in the second half of the year will moderate further as the low-base effect starts to fade.
In addition, growing uncertainty over key global economies could also dampen sentiment.
Standard Chartered economist Alvin Liew said: "Definitely there will be some months when the numbers would look weak and there would be some months where they could even turn negative, if for example we see a sharp contraction in biomedical, which in the past we've seen before. So we can't rule that out.
"Our outlook for the global markets itself in terms of export demand is likely to be weakened and therefore we would also see a slowing down in momentum for the manufacturing sector.
"For export demand, it's going to be looking weak and more and more uncertain especially when you look at the economic data coming out from key export destinations like the US, Japan and other potential drivers such as China.
"I think the China data is showing signs of slowing down. In the second half, there may be signs of further easing in terms of China demand, and that would also have an impact on trade-oriented countries."
Meanwhile, observers do not expect the Monetary Authority of Singapore to tighten its exchange rate policy. They believe the central bank will keep the Singdollar on its current course of a slow and gradual appreciation in its upcoming policy review in October.
-CNA/wk/ir
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