Factory output falls short of forecast, shrinks 0.3%

Employees are seen by their workstations at a printed circuit board assembly factory in Singapore on June 28.
Employees are seen by their workstations at a printed circuit board assembly factory in Singapore on June 28.PHOTO: REUTERS

Factories turned in yet another disappointing report card last month, as the volatile pharmaceutical segment dragged on growth.

Total manufacturing output shrank 0.3 per cent in June over the same month a year ago, lower than economists' expectations of a 0.5 per cent increase.

Manufacturing, which makes up a fifth of the economy, has been hit hard by tepid global growth and ongoing restructuring. The industry has been in recession for over a year, according to some economists.

The sector's output was almost flat in the first six months of the year compared with the corresponding period a year ago, rising just 0.3 per cent.

Biomedical manufacturing was a major drag on factory output in June: The cluster contracted 10.2 per cent compared with the same month last year, owing largely to a fall in pharmaceutical production, Economic Development Board data showed.

If the biomedical cluster were excluded, manufacturing output would have grown 2.4 per cent in June compared with last year.

Besides biomedical manufacturing, general manufacturing, chemicals and transport engineering also experienced declines in output.

However, there were bright spots.

Electronics, which makes up about a third of manufacturing output, expanded 19.7 per cent in June, owing largely to strong growth in the semiconductor and data storage segments.

Output from the precision engineering cluster also rose 4.3 per cent from a year ago.

Electronics is "finally showing some positive signs" after more than three years of being in the doldrums, said DBS economist Irvin Seah.

But the sustainability of this depends on the global economic outlook, which has been uncertain.

"China's slowdown, sluggish growth in the United States and uncertainties facing Europe after the Brexit referendum have weighed down consumers and manufacturers alike," said Mr Seah.

"The fact that all the other clusters, apart from electronics and precision engineering, have remained in the red is evidence of the challenging economic conditions."

ANZ economists Ng Weiwen and Glenn Maguire said the Brexit vote had limited impact on Asia and is, therefore, unlikely to hit Singapore's manufacturing output in the coming months.

But labour market data for the second quarter - due out tomorrow - will provide clearer insights into the health of the economy, they said.

A version of this article appeared in the print edition of The Straits Times on July 27, 2016, with the headline 'Factory output falls short of forecast, shrinks 0.3%'. Print Edition | Subscribe