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SINGAPORE: Singapore's factory output fell 7.4 percent year-on-year in June, due to a slump in pharmaceutical production.
That was the sharpest decline in nearly six years, which some economists said could lead to a downward revision in second quarter economic growth.
As drug companies here shut their factories to prepare for a different product mix, pharmaceutical output for the month of June shrank by 52.5 percent.
This pulled the overall June manufacturing number down for a worse-than-expected drop of 7.4 percent compared to a year ago.
Alvin Liew, Economist, UOB Treasury Research, said: "We were looking at a 2.8 percent contraction. The data that came in was a sharper-than-expected contraction of around 7.4 percent. This was largely due to pharmaceuticals output, which plunged 50 percent or so. It was also due to a slight decline in electronics output in June."
Some economists now said that final second quarter GDP numbers could come in lower than the 10.2 percent year-on-year growth forecast earlier.
However, there are some bright spots as the transport engineering cluster continued to turn in a strong showing, with a 31.3 percent increase in output compared to a year ago.
Shipyards ramped up shipbuilding, ship conversion and oil rig production activities in the marine and offshore segment.
Both the aerospace and land transport sectors also showed double-digit growth, driven by higher demand for aircraft repairs and vehicle components.
Electronics exports continued their decline for five consecutive months, contracting by 0.7 percent in June.
Lower output from consumer electronics, computer peripherals and data storage was offset by the 14 percent growth in semiconductors.
But the outlook for the sector appears to be brightening.
Some economists pointed out that on a seasonally-adjusted month-to-month basis, electronics output actually grew 5 percent from May.
Mr Liew said: "Book to bill ratios in the US still have not reached parity. However, book to bill ratios in Japan have improved in the last month. Tech sales seem to be improving in recent months, but prices are still not picking up. So on balance, I think we are keeping to our call for a moderate recovery in the second half."
Given signs of a tech recovery in the second half, economists said the economy appears to be on track to meet the government's full-year growth forecast of 5 to 7 percent.
- CNA/so
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