ELECTRONICS ALSO SLUGGISH: Growth in output was lower than expected and exports have been hampered by heavy competition in the semiconductor sector, say economists. -- PHOTO: LIANHE ZAOBAO

Industrial production fell by 1.5 per cent from a year ago, in a sharp reversal from the revised 2.2 per cent growth figure given in October.

And the outlook for next year might not be any better, as economists expect the United States sub-prime mortgage crisis to take its full toll on the real economy then.

The dip was roughly in line with market expectations, as forecasts by 14 economists in a Bloomberg poll had indicated a 1.8 per cent fall.

The latest data means growth in gross domestic product (GDP) in the fourth quarter could moderate from the stronger-than-expected 8.9 per cent jump in the third quarter, economists said.

Citigroup economist Kit Wei Zheng noted that manufacturing output edged up just 0.3 per cent in October to November, a sharp slowdown from the 10.5 per cent growth in the third quarter.

Growth last month was hamstrung largely by the volatile biomedical sector, according to the Economic Development Board (EDB), which compiles the data.

Output for pharmaceuticals - which form the bulk of the sector - plunged by 35.6 per cent, while output for medical technology products fell by 15 per cent thanks to reduced demand from Europe and the US.

Still, the dramatic dive was partly exaggerated by last year's high base, noted Mr Kit as drugs output surged by 46 per cent in November last year.

The key electronics sector is still picking up slowly, although growth eased last month from October. Output grew by 5.3 per cent from a year ago, well down on October's revised 8.3 per cent and reversing four months of acceleration.

Standard Chartered economist Alvin Liew noted that although electronics production has been on an uptrend, this has not translated into better export numbers.

One reason could be the 'intense competition within the semiconductor industry', which has led to export margins being squeezed as producers are forced to lower their prices, he said.

But the numbers were not all doom and gloom. Transport engineering output rose 31.9 per cent last month from a year ago, boosted by 53.5 per cent growth in marine and offshore engineering.

Economists are not enthusiastic about an improvement next year.

While electronics might 'revive from its doldrums', growth should 'remain unexciting' given the uncertain global outlook, said Mr Liew. He added growth in economic drivers such as transport engineering might moderate, given the high base this year.

OCBC economist Selena Ling expects the worst of the sub-prime crisis to come next year, adding that many 'adjustable-rate US mortgages will be reset in the coming months'.

For electronics, in particular, this means a double whammy: Not only will consumer spending be reined in as the US economy slows, but also, financial firms - traditionally big spenders on IT equipment - will cut back, said Ms Ling.