A dip in volatile biomedical output as well as a seasonal Chinese New Year slowdown contributed to a weaker-than-expected start to the year for Singapore manufacturers.
Factory output expanded 2.2 per cent last month compared with the same month a year earlier, disappointing economists who had expected growth of 9.5 per cent.
However, economists are optimistic that some segments of the sector will see robust growth this year.
Manufacturing, which makes up a fifth of the Singapore economy, has been experiencing a turnaround in recent months led by the electronics cluster.
Last month's numbers were dragged down by biomedical manufacturing, where output declined 13.5 per cent due to a drop in pharmaceuticals production. If biomedical manufacturing was excluded, overall manufacturing output would have grown 7 per cent last month.
Fall in biomedical manufacturing output due to a drop in pharmaceuticals production
Drop in output of food, beverages and tobacco, on the back of fewer production days last month as a result of Chinese New Year
Growth in precision engineering cluster
Rise in electronics production, thanks largely to a strong showing in semiconductors
The timing of the Chinese New Year holiday - which fell in February last year and in January this year - also distorted some year- on-year comparisons.
Output of food, beverages and tobacco, for instance, shrank 10.8 per cent on the back of fewer production days last month as a result of Chinese New Year. This weighed on the general manufacturing cluster, which saw production slide 13.8 per cent.
Other manufacturers fared better. The precision engineering cluster grew 24 per cent, while electronics production rose 14.8 per cent, thanks largely to a strong showing in semiconductors.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said they remain optimistic about the recovery in manufacturing.
"Electronics cycles have more 'persistence' qualities than biomedical production," they noted.
"We are encouraged that (export) data for January remained healthy, with electronics (shipments) to China and Taiwan especially strong."
Citi economist Kit Wei Zheng agreed the lift to manufacturing and trade-related industries is likely to persist but warned the impact is not being felt elsewhere in the economy. "Headwinds to growth remain as we continue to see the development of a two-speed economy, with domestically oriented and interest rate-sensitive sectors likely to underperform," he noted.
The fourth quarter of last year saw a broad-based fall in business sentiment for services, while household debt servicing burdens, corporate sector consolidation and the weak job market may remain a drag, Mr Kit added.