Singapore's manufacturing output climbed 0.9 per cent last month compared with the same period a year ago, thanks to sturdy growth within the biomedical cluster.
But excluding the biomedical cluster, output shrank 2.3 per cent, according to the Economic Development Board (EDB) yesterday.
May's overall increase was underpinned by the 13.2 per cent year-on-year rise in biomedical output, with the pharmaceuticals segment up 14.2 per cent, and the medical technology segment rising 9.2 per cent.
The electronics cluster rose 5.9 per cent, lifted by higher output in semiconductors (16.6 per cent) and other electronic modules and components (4.5 per cent), although this was partially offset by declines in other areas.
All the remaining clusters suffered a drop in output - led by transport engineering, which sank 17.2 per cent in May.
This came even as aerospace expanded 21.7 per cent on the back of more engine repair jobs from commercial airlines, while output from land transport rose 10 per cent.
While direct impact from Brexit-related headwinds is relatively small, manufacturing and business services, especially real estate and business services, could be hit harder, with the indirect impact via exposure to broader European Union slowdown significantly larger.
CITI RESEARCH ECONOMIST KIT WEI ZHENG
The main drag on the cluster came from marine and offshore engineering, which slumped 34.2 per cent due to less rig-building activity and weaker demand for oilfield and gasfield equipment in the light of low oil prices.
The chemicals cluster's output fell 0.8 per cent in May. The other chemicals segment posted a robust growth of 22.3 per cent and the petroleum segment rose 4.4 per cent, but this was not enough to make up for the decline in the specialities (-4.2 per cent) and petrochemicals (-10.8 per cent) segments.
Output of the precision engineering cluster slid 1 per cent, while that of general manufacturing industries decreased 2 per cent.
On a seasonally adjusted month- on-month basis, total manufacturing output was down 0.4 per cent over April. Exclude biomedical manufacturing and the drop was 1.4 per cent.
Dr Tan Khay Boon, senior lecturer at SIM Global Education, believes that in spite of May's small improvement in total year-on-year output, the manufacturing sector is "not out of the woods yet".
He said the pharmaceuticals segment is "notoriously volatile", which means growth is unlikely to be sustained unless there is a stronger boost from the more promising medical technology segment.
In a similar vein, OCBC economist Selena Ling noted that while total manufacturing output grew by a "tepid but positive" 0.5 per cent year-on-year for the first five months this year, the underlying strength, which excludes output from the biomedical cluster, was much weaker at negative 3.6 per cent.
As such, it remains unclear whether manufacturing output can continue to rack up growth for the full year, she said.
Citi Research economist Kit Wei Zheng said May's data came below expectations of 1 per cent, and that momentum likely slowed towards the end of the second quarter - which, if sustained, may point to a weak start to the third quarter's gross domestic product.
"Cyclical headwinds from global capex weakness, the structural drag from onshoring of production in China, and an elevated cost structure could weigh on the outlook for exports," he said.
"Meanwhile, the outlook for consumers remains challenged, amid an accelerated pace of household deleveraging and the deteriorating job market.
"While direct impact from Brexit- related headwinds is relatively small, manufacturing and business services, especially real estate and business services, could be hit harder, with the indirect impact via exposure to broader European Union slowdown significantly larger."