Singapore's manufacturing output came in lower than expected last month despite a boost from pharmaceuticals, growing 2.7 per cent compared with the same period in 2017.
Economists in a Bloomberg poll had predicted 4 per cent year-on-year growth and analysts expect a more muted outlook ahead.
Preliminary data, released yesterday by the Economic Development Board (EDB), appears in line with weaker numbers reported in the region, Maybank Kim Eng economist Lee Ju Ye told The Straits Times. Taiwan's manufacturing contracted last month and South Korea saw growth of close to zero.
Purchasing Managers' Indexes - a key indicator of economic activity - have fallen in Asia, Europe and the US as well, she said.
In Singapore, according to EDB preliminary figures, four out of six clusters contracted last month.
"It supports the story that manufacturing is affected as the tech cycle weakens and the US-China trade war seems to be disrupting some supply chains," Ms Lee said. "Manufacturing in Singapore may contract for a few months in early 2019, partly because of front-loading of orders in late 2018. The downturn could worsen in mid-2019 if there is no US-China trade deal in March."
Other factors that could pose a drag include a weaker semiconductor sector, she added, noting that December numbers were the weakest in three years for the sector.
Singapore's smaller rise in manufacturing output last month came despite a boost from biomedicals, with production up 29.9 per cent.
This was the fastest growth since August 2017, when it rose 30.5 per cent year on year, said UOB economist Barnabas Gan.
Excluding biomedical manufacturing, overall factory output fell 1.8 per cent. On a seasonally adjusted month-on-month basis, manufacturing output decreased 5.6 per cent after two months of increases.
Overall industrial output for last year, however, rose 7.2 per cent from the year before - a marked slowdown from 2017's 10.4 per cent.
Biomedicals were supported by strong pharmaceuticals output, with higher production of active pharmaceutical ingredients and biological products. Another contributor was medical technology.
DOWNTURN COULD WORSEN
Manufacturing in Singapore may contract for a few months in early 2019, partly because of front-loading of orders in late 2018. The downturn could worsen in mid-2019 if there is no US-China trade deal in March.
MAYBANK KIM ENG ECONOMIST LEE JU YE, on the outlook for Singapore's manufacturing output.
The only other cluster with an increase was transport engineering, where output grew 23.7 per cent.
Key contributors to the rise were the marine, offshore engineering and aerospace segments. But it is unclear if strength in the marine and offshore space can be sustained, said Ms Lee, since oil prices have fallen from their peaks and this may mean delays in some projects.
Four other clusters saw drops, including in electronics, where output fell 6.8 per cent last month.
Most electronics segments contracted, except for infocomm and consumer products as well as the other modules and components.
Precision engineering output fell as well by 8.7 per cent, with declines in machinery and systems segments, and that of precision modules and components.
The contractions in these two clusters coincided with the latest December non-oil domestic export figures, which saw exports of electronics products falling 11.2 per cent, said UOB's Mr Gan.
The chemicals cluster saw a fall of 1.4 per cent, with the other chemicals segments and petrochemicals slipping. General manufacturing output dropped 5.7 per cent as well, largely due to the printing segment, as well as the food, beverages and tobacco segment.
Overall, all clusters saw an increase in output for last year, compared with 2017.