Factory output soars to surprise 2.9%

The headline figure was lifted way above forecasts with a surprise surge in semiconductor and biomedical manufacturing.
The headline figure was lifted way above forecasts with a surprise surge in semiconductor and biomedical manufacturing.ST FILE PHOTO

Fastest clip in 2 years but bosses worry as four out of six clusters are still shrinking

Factory output here jumped 2.9 per cent in April over the same month last year, the fastest pace in almost two years and better than March's revised 0.1 per cent expansion.

A surprise surge in semiconductor and biomedical manufacturing lifted the headline figure way above private sector economists' forecast for a 0.2 per cent contraction.

But with four out of Singapore's six manufacturing clusters still shrinking, factory bosses questioned the firmness of the rebound.

"Probably, this is just a blip," said Mr K.K. Goh, executive director of Ka Shin Technologies, which makes precision components. Mr Goh does not see a recovery coming in under six months.

"In Indonesia, business is still slow. Lots of big names, including carmakers, aren't moving. In Vietnam, there seems to be an increase in activity because the Koreans came in, but it doesn't look like we've crossed the bridge yet. Our friends in Japan, China don't see any bright lights."

A 14.9 per cent jump in biomedical manufacturing and a 10.9 per cent surge in electronics output from a year earlier led last month's manufacturing expansion.

A 14.9 per cent jump in biomedical manufacturing and a 10.9 per cent surge in electronics output from a year earlier led last month's manufacturing expansion.

But growth was uneven - the transport engineering, precision engineering, general manufacturing and chemicals clusters all reported a fall in activity.

Excluding output from the volatile biomedical cluster, total output was down 0.1 per cent, fresh data from the Economic Development Board showed yesterday.

Nomura economist Euben Paracuelles said: "Overall, the industrial production data appear to have improved in April. However, we remain cautious on the sustainability of the pickup, not just because of the volatile biomedical segment but also the continued weakness in non-oil domestic exports (Nodx), especially when external demand remains soft."

On Wednesday, trade agency IE Singapore cut its full-year Nodx growth forecast from a range of zero to 2 per cent to -3 to -5 per cent, citing a weaker global outlook.

The same day, the Ministry of Trade and Industry (MTI) also warned in its quarterly Economic Survey of Singapore that the "continued sluggishness" in global trade could weigh on externally driven sectors such as manufacturing, transportation and storage.

"Persistent low oil prices will also continue to dampen the outlook for firms in the marine and offshore segment, as well as those in the precision engineering cluster that support the oil and gas industry," the MTI said.

UOB economist Francis Tan noted that the manufacturing sector is "not fully out of the pit-hole".

But he was also more upbeat than most, tipping that the strength in semiconductor output could continue to the end of the year, with leading indicators such as the United States semiconductor book-to-bill ratio showing a higher number of orders booked as well as products billed.

SEE BUSINESS

A version of this article appeared in the print edition of The Straits Times on May 27, 2016, with the headline 'Factory output soars to surprise 2.9%'. Print Edition | Subscribe