Singapore factory output up 5.8% in March but misses analysts’ forecasts as tariffs loom

SINGAPORE - Singapore’s manufacturing production rose for the ninth straight month year on year but fell short of analysts’ expectations.

Factory output expanded 5.8 per cent in March year on year, after an upwardly revised 0.9 per cent increase in February. Economists polled by Bloomberg had forecast growth of 8.1 per cent.

Excluding biomedical manufacturing, output grew 4.9 per cent, according to data from the Economic Development Board on April 25.

Indicating the slowing momentum though, on a seasonally adjusted month-on-month basis, manufacturing output dropped 3.6 per cent in March. Excluding biomedical manufacturing, it increased 0.8 per cent.

Analysts said the outlook for Singapore’s key manufacturing sector is uncertain, with

the effects of looming tariffs yet to be seen.

OCBC Bank chief economist Selena Ling said: “Depending on the eventual outcome of tariff negotiations during the 90-day suspension period for reciprocal tariffs... the outlook for the domestic manufacturing industry remains uncertain at this juncture.

“Even assuming that some of the tariffs, especially on China, are partially unwound over time, if companies have put on hold their capital expenditure, investments or hiring intentions, this would still imply some downside growth risk.”

DBS Bank senior economist Chua Han Teng added that despite the improvement in factory activity in March, the outlook for the export-oriented sector “will likely weaken” especially for the second half of the year.

Said Mr Chua: “A more protectionist global landscape, led by higher US tariffs on a wide range of trading partners including China, will likely dampen external demand, negatively impacting Singapore’s manufacturing prospects.

“The city-state’s factories remain vulnerable to the heightened unpredictability and uncertainty from the US tariff roller coaster.”

By sector, electronics output increased 8.9 per cent in March on a year-on-year basis.

Within this cluster, the infocomms and consumer electronics segment grew 14.1 per cent, while semiconductors increased by 8.2 per cent, and the other electronic modules and components segment grew 1.6 per cent.

Conversely, the computer peripherals and data storage segment contracted 2.9 per cent.  

The transport engineering cluster also saw output grow, by 20.2 per cent year on year.

The aerospace segment expanded 30.9 per cent, bolstered by higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines. Meanwhile, the marine and offshore engineering segment increased by 8.1 per cent, while the land segment jumped by 5.4 per cent.

Biomedical manufacturing output also rose, by 17.2 per cent. Within this cluster, the pharmaceuticals segment rose 44.1 per cent, while the medical technology segment increased by a smaller 0.3 per cent.

But Mr Chua cautioned that while the electronics and biomedical manufacturing clusters improved in March, they remain “susceptible to downside risks from potential US levies on semiconductor and pharmaceutical imports”.

He noted that the Trump administration is considering these levies and could introduce them in the coming months.

“Singapore’s deep integration into the global semiconductor supply chain makes it indirectly vulnerable to a broader US tariff-induced semiconductor downturn. US pharmaceutical import duties pose higher downside growth risks for Singapore compared with other Asean-6 peers,” he said, referring to the top six Asean economies of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Meanwhile, other clusters registered a decline in output in March.

The precision engineering cluster saw output dip by 0.1 per cent. Within this cluster, the machinery and systems segment increased 0.3 per cent, supported by higher production of measuring devices and back-end semiconductor equipment.

Conversely, the precision modules and components segment declined 1.7 per cent, led by lower output of optical instruments and metal precision components.

The chemicals cluster also saw decrease in output, of 6 per cent, with all segments recording declines.

The petroleum, specialities and petrochemicals segments declined, with the specialities segment recording lower production of gases and chemical additives for industrial uses as well as biofuels.

The other chemicals segment also contracted on account of lower output of fragrances.

The general manufacturing cluster also saw output fall, by 13 per cent. The printing and food, beverages and tobacco segments fell, with lower production of beverages, dairy and bakery products.

The miscellaneous industries segment contracted too, led by lower output of structural metal components and products, wooden furniture and paper and paperboard containers and boxes.

Ms Ling noted that the March industrial output implies a potential downward revision in Singapore’s manufacturing growth estimates.

This is given that the advance first-quarter gross domestic product growth estimates of 3.8 per cent year on year had factored in a 5 per cent year-on-year growth in the manufacturing sector.

“This March industrial output miss implies a potential downward revision in the manufacturing growth to just 4 per cent year on year, and hence also the first-quarter GDP growth estimate to around 3.6 per cent year on year,” she said.