Knockout performance by manufacturing again

Surging global demand for electronics was again the main growth driver, with output in the segment surging 33 per cent over the same month last year.
Surging global demand for electronics was again the main growth driver, with output in the segment surging 33 per cent over the same month last year. PHOTO: ST FILE

Electronics drives 14.6% growth in Sept, signalling upward revision of Q3 figures

Manufacturing has turned in another stunning performance with growth last month of 14.6 per cent - a knockout number that left expert predictions in the dust.

Surging global demand for electronics was again the main growth driver, with output in the segment surging 33 per cent over the same month last year.

Manufacturing's stellar showing will give the overall economy a shot in the arm, and also signals an upward revision in official economic growth estimates for the third quarter, economists say.

Factory output, which makes up a fifth of the economy, has been a key growth driver this year.

Taking yesterday's Economic Development Board data into account, manufacturing expanded 18.6 per cent in the July to September quarter, noted DBS senior economist Irvin Seah.

This is up significantly from the 15.5 per cent rate projected by the Ministry of Trade and Industry (MTI) in its advance economic growth estimates, which mainly take into account data from the first two months of the quarter.

"Plainly, third-quarter economic growth will have to be revised upwards," said Mr Seah.

MTI advance estimates tip economic growth of 4.6 per cent in the third quarter compared with the same period a year earlier.

Yesterday's data is expected to lift this figure, but the exact magnitude of the adjustment would also depend on the performance of the service sector, said OCBC economist Selena Ling.

Almost all manufacturing segments expanded last month, but electronics, especially amid strong global demand for semiconductors and related equipment, was once again the top performer.

Output of the precision engineering cluster - another beneficiary of the rise in global electronics demand - grew 15.4 per cent from a year earlier.

"Though there have been some signs of moderation in electronics in recent months, the pace of growth has otherwise remained exceptionally strong," Mr Seah noted.

"Any further softening in coming months will likely be attributed to base effects, seasonal factors and production capacity constraints rather than weakness in demand. In short, we continue to expect the electronics cluster to remain the bright spark in the medium term."

Manufacturing's strong showing has also prompted Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye to raise their full-year economic growth forecast to 3.4 per cent, from 3.2 per cent previously.

They added that MTI will likely upgrade its full-year growth forecast range to 3 per cent to 3.5 per cent, from the current 2 per cent to 3 per cent.

A version of this article appeared in the print edition of The Straits Times on October 27, 2017, with the headline 'Knockout performance by manufacturing again'. Print Edition | Subscribe