Surprise 0.1% rise in factory output on biomed boost

Biomedical manufacturing output jumped by 21.9 per cent year on year, boosted by a 26.2 per cent increase in the pharmaceutical segment. Output from the medical technology segment grew by 10.8 per cent.
Biomedical manufacturing output jumped by 21.9 per cent year on year, boosted by a 26.2 per cent increase in the pharmaceutical segment. Output from the medical technology segment grew by 10.8 per cent.ST PHOTO: KUA CHEE SIONG

Economists say firms could be rushing orders before additional US tariffs on Chinese goods

At first glance, the numbers seem cheery, but a closer look shows problems still remain.

Singapore's factory output crept up by 0.1 per cent last month from a year ago, recovering from a bad showing in August when production slid by 6.4 per cent.

The small gain surprised economists polled by Bloomberg, who had expected production to decline by 4.8 per cent from a year ago.

But excluding the volatile biomedical manufacturing cluster, which boosted overall figures last month, output fell by 4.3 per cent compared with a year ago, preliminary data released by the Economic Development Board revealed.

Economists said that despite the overall lift, the latest figures remain sobering.

They added that factories might be rushing to complete their orders before the United States slaps tariffs on an additional US$160 billion (S$218 billion) of Chinese products - a move that is expected to take place in December.

CIMB Private Banking economist Song Seng Wun said companies are bringing forward production cycles and trying to complete orders before the tariffs kick in.

CLUSTER-SPECIFIC BOOST

The surprise minor gain is clearly driven by a cluster-specific boost from biomedical manufacturing, which has held steady in recent months.

ASSOCIATE PROFESSOR LAWRENCE LOH, from the National University of Singapore Business School.

The US-China trade war has created much uncertainty, he added.

"The certainty here, it seems, is the upcoming tariffs, and companies are working based on the December 'deadline'."

The overall output rise last month was boosted mainly by the volatile biomedical manufacturing cluster and aided by a milder-than-expected decline in the electronics cluster. Biomedical manufacturing output jumped by 21.9 per cent last month compared with a year ago, boosted by a 26.2 per cent increase in the pharmaceutical segment.

Output from the medical technology segment also grew by 10.8 per cent in the same period.

Other bright spots were the precision engineering cluster, which grew by 4 per cent last month, compared with a year ago, and the transport engineering cluster, which grew by 3 per cent.

Associate Professor Lawrence Loh from the National University of Singapore Business School said: "The surprise minor gain is clearly driven by a cluster-specific boost from biomedical manufacturing, which has held steady in recent months."

Output from the electronics cluster fell by 9.6 per cent last month from a year ago, dragged down mostly by a 13 per cent drop in semiconductors. Growth in the data storage and infocomms and consumer electronics segments lifted overall cluster output.

Chemicals output fell by 3.9 per cent from a year ago, while general manufacturing output contracted by 7.4 per cent in the same period.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said "the worst seems to be over for Singapore's manufacturing", adding that numbers for July and August were also revised upwards. For example, revised figures for August showed overall factory output declined by 6.4 per cent, and not the initial 8 per cent reported last month.

But Mr Song warned that the economy remains fragile. "Overall, output has been expanding and contracting over the past few months, which shows that we are not out of the woods yet."

A version of this article appeared in the print edition of The Straits Times on October 26, 2019, with the headline 'Surprise 0.1% rise in factory output on biomed boost'. Print Edition | Subscribe