Factory output suffers steepest decline in more than three years

The manufacturing industry suffered its worst month in more than three years as output from the electronics and precision engineering sectors plunged in March.

The industry's positive showing in February proved a false dawn, with overall production contracting by 4.8 per cent compared with the same month last year.

This was the steepest decline in output since the 11.9 per cent plunge in December 2015, when global demand crashed.

If the volatile biomedical manufacturing is excluded, factory output would have tumbled 8.7 per cent, the Economic Development Board (EDB) said yesterday.

Last month's dire performance was worse than an estimate of a 4.6 per cent decline tipped by economists in a Bloomberg poll.

It also contrasts with the 2.6 per cent output growth in February, which was revised up from an earlier estimate of 0.7 per cent.

Three out of six industry clusters clocked year-on-year declines last month, with electronics the worst performer as output dived 15.3 per cent following an unexpected 2.8 per cent rise in February.

 
 

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said this was the sector's worst performance in six years and suggests the global electronics down cycle could be worsening. "Global chip sales still face significant headwinds in the coming quarters, as spending on IT equipment weakens as the uncertainty in business environment is prolonged," they said, noting the Monetary Authority of Singapore's cautionary tone in its review yesterday.

Within the electronics cluster, infocomms and consumer electronics as well as other electronic modules and component segments grew, while all others recorded declines, noted the EDB. Output for the data storage segment, in particular, plunged 38.9 per cent year on year, faster than the 27 per cent seen in February.

Precision engineering recorded a 13.3 per cent fall last month, the same decline as in February.

The chemicals cluster logged a 2.7 per cent fall year on year in March, which saw almost all of its segments, such as petroleum, petrochemicals and specialities, slip.

On the flip side, biomedical manufacturing output rose the most - by 13.7 per cent last month on the back of strong efforts in pharmaceuticals and medical technology.

The general manufacturing cluster saw a 5.8 per cent year-on-year increase while transport engineering went up 1.8 per cent last month compared with a year earlier, thanks to more repair and maintenance jobs from airlines.

But there were also lower levels of offshore project as well as shipbuilding and repairing activity, contributing to a 10.2 per cent year-on-year decline for the marine and offshore engineering segment in March.

SIM Global Education senior lecturer Tan Khay Boon said the outlook for the overall manufacturing sector is likely to remain poor as demand for electronics may stay weak.

A version of this article appeared in the print edition of The Straits Times on April 27, 2019, with the headline 'Factory output suffers steepest decline in more than three years'. Print Edition | Subscribe