Electronics hums on confidently in August output

Precision engineering grew 11.6 per cent year on year on the back of higher demand for semiconductor-related equipment and mechanical engineering work. Demand for the new iPhone 7 will also likely boost semiconductor demand.
Precision engineering grew 11.6 per cent year on year on the back of higher demand for semiconductor-related equipment and mechanical engineering work. Demand for the new iPhone 7 will also likely boost semiconductor demand.ST FILE PHOTO

But biomedical, offshore and marine sectors weigh on overall manufacturing performance

Manufacturing in Singapore remained in the doldrums last month, with output barely up from a year earlier, but some economists see hints of a turnaround.

Production rose just 0.1 per cent from August last year - well below forecasts of a 0.5 per cent gain.

Still, said Ms Selena Ling, head of treasury research and strategy at OCBC, it is an improvement from the 3.5 per cent drop in July and "affirms the recent 'green shoots' story in the manufacturing sector".

The biomedical sector was the main drag on overall manufacturing for the third month in a row. Output fell 8.4 per cent year on year and followed the 9.7 per cent drop in July, based on Economic Development Board data released yesterday.

UOB economist Francis Tan warned that uncertainty over Brexit and its impact on local exports to the European Union may mar prospects for other manufacturing clusters, especially "a euro zone-dependent" biomedical sector.

  • AUGUST YEAR ON YEAR

  • 10.8%

    Electronics - biggest cluster in S'pore manufacturing

If the biomedical numbers are excluded, factory output grew 2.3 per cent in August, boosted by precision engineering and chemicals.

Sluggish exports and depressed demand for offshore drilling rigs also weighed on the manufacturing sector. Transport engineering was the worst hit, with output sinking 16.8 per cent year on year as rig-building activities and demand for oilfield and gas field equipment stayed weak.

This segment has contracted for 24 of the 27 months since June 2014, when global oil prices started falling, Mr Tan noted.

The marine and offshore engineering segment plunged 31.4 per cent, which offset gains made in the land transport and aerospace sectors.

There were some positive notes, however. Precision engineering grew 11.6 per cent year on year on the back of higher demand for semiconductor-related equipment and mechanical engineering work.

Electronics, the biggest cluster in Singapore manufacturing, rose for a third straight month, up 10.8 per cent year on year, helped by increased sales of semiconductor and other electronic components.

Mr Tan said the strong output in electronics coincided with better-than-expected August export orders in Taiwan and strong demand in the United States for the new iPhone 7, which will likely boost demand for semiconductors.

"However optimistic the electronics cluster may be, it is only 27.4 per cent of total manufacturing activities," he noted, adding that while the sector's numbers last month were robust, they were slower compared with the 16.2 per cent expansion recorded in July and June's 19.7 per cent increase.

Compared with a stronger performance in September and October last year, the industrial production data in the coming months may not be up to par because of headwinds, including business concerns about the US presidential election and the ongoing local restructuring efforts, OCBC's Ms Ling said.

"But should electronics, especially semiconductor, output be sustained... with some support from precision engineering, and possibly (slower) biomedical/ pharmaceutical declines, then overall manufacturing could come in at around flat on-year growth for the full year," she added.

A version of this article appeared in the print edition of The Straits Times on September 27, 2016, with the headline 'Electronics hums on confidently in August output'. Print Edition | Subscribe