SINGAPORE - Singapore’s manufacturing production suffered an unexpected drop in December, weighed down by double-digit losses in the biomedical industry.
Total factory output declined by 2.5 per cent year on year in December, a reversal from November’s revised zero growth, according to data released by the Economic Development Board (EDB) on Jan 26. The initial estimate for November issued in December was for a 1 per cent rise in output.
Excluding the volatile biomedical industry, factory output grew by 0.5 per cent in December.
For the whole of 2023, manufacturing output shrank by 4.3 per cent. Excluding biomedical manufacturing, it contracted by 3.6 per cent for the whole year.
The key electronics industry, which accounts for 45 per cent of local manufacturing production, was the best performer in December with 6.3 per cent year-on-year growth.
Within electronics, the semiconductors segment expanded 17.7 per cent, supported by improved demand in selected end markets such as smartphones. However, other electronics modules and components shrank by 7.8 per cent, computer peripherals and data storage decreased by 17 per cent, and infocommunications and consumer electronics contracted by 18.1 per cent.
For December, the biomedical industry was the worst performer, with production plunging 23.9 per cent year on year.
Within the cluster, the medical technology segment increased 8.6 per cent, with higher export demand for medical devices. But output of the pharmaceuticals segment tumbled 45 per cent with lower production of biological products and a different mix of active pharmaceutical ingredients.
DBS Bank economist Chua Han Teng noted that while the worst of Singapore’s factory slump is already over, the manufacturing recovery is expected to be gradual and fragile in 2024.
He added: “The global economic environment remains uncertain, due to high interest rates in advanced economies, the bumpy economic recovery in China, as well as lingering geopolitical tensions that could still disrupt supply chains – the diversion of cargo ships in the Red Sea since December is a reminder of unexpected events that could hinder the trade and manufacturing recovery.”
Meanwhile, output in the transport engineering cluster edged up 0.2 per cent in December, over the same month in 2022.
The aerospace segment led the charge with an expansion of 4.9 per cent due to higher demand for aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines on the back of strong air travel demand globally. However, the marine and offshore engineering and land segments declined 1.7 per cent and 10.8 per cent, respectively.
In the precision engineering industry, output fell 7.4 per cent year on year, with the machine and systems segment shrinking 1.8 per cent largely due to lower output of measuring devices and mechanical engineering works. The precision modules and components segment contracted 24.7 per cent, due to lower output in plastic and metal precision components, optical instruments as well as dies, moulds, tools, jigs and fixtures.
General manufacturing output fell 15.9 per cent over December 2022, weighed down by lower production of batteries and structural metal products.
In the chemicals cluster, output rose by 2.8 per cent year on year.
The specialities and petroleum segments grew 29.1 per cent and 1.7 per cent, respectively, with the former recording higher production of mineral oil additives. The other chemicals segment declined 5.4 per cent on account of lower output in fragrances, while the petrochemicals segment fell 5.5 per cent due to weak market demand.
UOB economists Alvin Liew and Jester Koh noted that output momentum could remain weak in the first half of 2024, as external demand continues to be weighed down by tight financial conditions. These include an elevated interest rate environment in the United States and the European Union, as well as the ongoing stresses in the property sector in China, which could dampen consumer and business sentiment.
The economists said: “Signs of a broader recovery in manufacturing could emerge towards the middle of 2024 as central banks in major advanced economies may begin to lower policy rates as inflation in their respective economies moderate and inch closer to the 2 per cent objective, with the consequent easing of financial conditions supporting consumption and investment activity, which will imply a gradual recovery in external demand.”
