Growth in Singapore manufacturing eases to 6% as expected

Employees of semiconductor giant, Infineon, working on the plant-floor in its facilities at Kallang Way. Factory output has cooled since hitting growth of 10.9 per cent and 13.0 per cent in April and May this year. PHOTO: LIANHE ZAOBAO

Growth in Singapore's manufacturing sector continued to ease last month, with output rising 6 per cent year on year, lower than June's revised figure of an 8 per cent expansion.

This follows the stronger showing in factory output earlier this year, and is in line with economists' expectations of slower performance in the second half of the year.

A slower pace is expected following strong growth in the third quarter last year due to electronics output. This means that the figures in the coming months will be compared to a higher base.

Still, growth last month was broad-based with all but one cluster seeing expansion.

Manufacturing performance was supported by the volatile biomedical manufacturing cluster last month, which saw its output rise 10.1 per cent year on year, down from 13.1 per cent the previous month, according to figures released by the Economic Development Board (EDB) yesterday.

The biomedical cluster's strong growth was fuelled by the 14.1 per cent expansion in pharmaceuticals - down from its 17.4 per cent growth in June - even as the medical technology segment shrank again, by 1.2 per cent. Excluding the biomedical sector, factories here clocked 5.1 per cent growth.

Electronics grew 5.4 per cent, expanding for its 29th consecutive month but slowing from its 7.9 per cent growth in June. Performance was led by other electronic modules and components, which saw 12.3 per cent growth last month.

Semiconductors, as well as the infocomms and consumer electronics segments recorded growth, but the data storage and computer peripherals segments contracted 1.1 per cent and 13.7 per cent respectively.

OCBC Bank's head of treasury research and strategy Selena Ling said that current trends suggest a further slowdown in the electronics cluster could be on the cards. Trade tensions between the United States and China could cause some headwinds as well.

"In particular, the US' tariffs on the next US$200 billion (S$274 billion) tranche for Chinese imports could kick in in the fourth quarter of this year, after the public comment period ends on Sept 5," she said. "If you look at the tariffs, these are mostly agricultural, fruit and vegetables, and white goods such as refrigerators and washing machines, so there could be some spillover effects into electronics as well."

In the transport cluster, output rose 9.6 per cent year on year last month, down from 14.3 per cent growth in the preceding month. It was propped up by the aerospace segment's 23.5 per cent growth, a sharp rise from its 4.9 per cent growth the month before - due to a higher volume of engine repair and maintenance work from commercial airlines, said EDB.

Separately, growth in the land transport segment dipped 9.8 per cent, easing from its 28.1 per cent contraction in June, while the marine and offshore engineering segment rose 1.4 per cent.

Noting that growth in the marine and offshore engineering segment moderated notably from its previous rise of 32.1 per cent, Nomura economist Brian Tan said this reflects caution on the sustainability of current oil prices. "Looking back at 2014 or 2015, with the collapse in oil prices, people may have wised up to the idea that sharp falls are no longer impossible," he added.

In the chemicals cluster, output grew 7.4 per cent, helped by increments in the other chemicals, petrochemicals and specialities segments.

Output for precision engineering rose 3.4 per cent, while general manufacturing was the only cluster to see a contraction - of 0.6 per cent year on year last month.

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A version of this article appeared in the print edition of The Straits Times on August 25, 2018, with the headline Growth in Singapore manufacturing eases to 6% as expected. Subscribe