Singapore factory output back to growth in July, with better-than-expected 1.8% rise

SINGAPORE – Singapore’s manufacturing sector returned to growth in July with a performance that topped market expectations, according to data released on Aug 26.

Factory output expanded by 1.8 per cent in July year on year, with all but the biomedical industry recording growth, said the Economic Development Board (EDB).

It reversed the downwardly revised 4.3 per cent contraction in June, and beat the 0.2 per cent rise that was the median forecast by analysts in a Bloomberg poll.

Excluding biomedical manufacturing, output increased 3.4 per cent.

On a seasonally adjusted month-on-month basis, manufacturing output expanded 10.1 per cent. Excluding biomedical manufacturing, it grew 4.1 per cent.

July’s positive turn is in line with the Government’s view that Singapore’s manufacturing sector will see a gradual recovery in the second half of 2024.

In particular, the key electronics cluster was projected to recover more strongly, supported by robust demand for smartphone, PC and artificial intelligence-related chips, the Ministry of Trade and Industry (MTI) said earlier in August.

Mr Barnabas Gan, RHB acting group chief economist and head of market research, said that Singapore’s manufacturing and trade-related sectors will contribute to overall growth in the second half of 2024.

He noted that drivers for the optimistic outlook include stronger-than-expected July industrial production performance that topped the market’s expectations, bright spots in specific industries and the relatively positive outlook on the electronics cluster.

“We saw a strong expansion in the key electronics cluster, specifically semiconductors, computer peripherals and data storage and other electronic modules,” he said.

EDB’s latest data showed electronics output expanded 2.8 per cent year on year in July, after contracting 6.7 per cent in June.

Within the industry, the computer peripherals and data storage segment jumped 34.9 per cent, while other electronics modules and components grew 6.1 per cent. The semiconductors segment increased by 1.9 per cent.

However, the infocommunications and consumer electronics segment contracted 6.6 per cent.

Transport engineering output also performed well, with output growing 13.3 per cent in July. The aerospace segment rose 21.7 per cent, with higher demand for aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines. The land segment saw 16.5 per cent growth.

However, the marine and offshore engineering segment declined 1.2 per cent on the back of lower project milestones met.

General manufacturing also recorded an increase in output of 7.3 per cent in July.

The food, beverages and tobacco segment grew 8.4 per cent on account of higher output of beverage products, milk powder and cocoa products. In addition, the miscellaneous industries segment rose 6.8 per cent with higher production of construction-related materials such as ready-mixed concrete and steel structural components.

Conversely, the printing segment declined 0.5 per cent. 

Chemicals output also grew – by 1.7 per cent in July. The petrochemicals segment expanded 8.6 per cent, increasing from a low base in 2023 due to plant maintenance shutdowns. The specialities segment also grew, but the petroleum and other chemicals segments declined.

The precision engineering cluster also expanded – by 0.7 per cent. The precision modules and components segment increased 2.2 per cent, led by higher output of plastic precision components and electronic connectors.

Conversely, the machinery and systems segment declined 0.1 per cent.

The only laggard in July was biomedical manufacturing, with its output contracting 17.4 per cent year on year. The medical technology segment declined 1.6 per cent on the back of lower export demand for medical devices, while the pharmaceuticals segment fell 27.4 per cent on account of a different mix of active pharmaceutical ingredients being produced compared with a year ago.

DBS Bank economist Chua Han Teng said: “The return of Singapore’s manufacturing output to growth at the start of the third quarter of 2024 aligns with our expectation for a gradual recovery in the second half of 2024, following choppy performance in the second quarter.”

He added that the manufacturing sector has already benefited from an electronics upturn since the second quarter, and analysts anticipate that the positive momentum will continue in the coming months.

“Electronics, which accounts for nearly half of Singapore’s factory output, remains the most optimistic cluster within the manufacturing sector for the second half of 2024, according to the EDB’s latest quarterly business expectations survey,” Mr Chua said.

He added: “We continue to expect Singapore’s electronics firms to capitalise on the global technology upcycle, driven by the replacement of smartphones and PCs, as well as the broadening adoption of artificial intelligence applications.”

But Mr Chua cautioned that analysts remain vigilant about ongoing uncertainties that could hinder manufacturing improvement, such as ongoing geopolitical conflicts, which, if intensified, could disrupt supply chains and weigh on global trade and manufacturing activity.

Earlier in August, economists said that they expected manufacturing to make a gradual recovery, although the road might be bumpy and uneven.

They looked to a broadening upturn in the tech sector that could give manufacturing a boost.