Pharmaceuticals' surge helps drive 16.5% output rebound

Factory output rocketed in March but the surprising increase is partly a statistical quirk coupled with a surge in the traditionally volatile pharmaceutical sector.

The robust numbers out yesterday are likely to be the best for a while, given the manufacturing sector had yet to be significantly impacted by the coronavirus outbreak.

The data certainly looks robust, with production in March up 16.5 per cent over the same month last year, thanks to that rise in drugs output and a low base in 2019.

Output was unchanged even when biomedical manufacturing was excluded.

Production increased 21.7 per cent from February on a seasonally adjusted basis, a stark reversal of the 22.1 per cent plunge from January to February, Economic Development Board data noted yesterday.

Analysts said the sudden surge in output is unlikely to continue.

Barclays economist Brian Tan said: "Even if the strength in biomedical output is sustained, we doubt this would be of great comfort to policymakers, as the economic spillovers from the biomedical cluster to the rest of the economy tend to be limited.

"The broader economy and labour market will likely remain under severe pressure due to the economic disruption from the government's recently extended circuit breaker."

SIM Global Education senior lecturer Tan Khay Boon added that the demand from the aerospace segment will decline while low oil prices will depress marine and offshore engineering firms.

The important electronics cluster is also still facing declining demand, he added.

Biomedical manufacturing expanded 91.4 per cent in March over the same period last year while pharmaceuticals jumped 126.6 per cent on the back of higher production of active ingredients and biological products.

The medical technology segment rose 6.3 per cent with higher export demand for devices.

Another major boost came from precision engineering, which lifted output 21.2 per cent in March, largely due to the machinery and systems segment.

Production grew 28.7 per cent on the back of more semiconductor equipment demand.

Transport engineering increased output 7.6 per cent, land transport added 15.2 per cent and aerospace 11.9 per cent, thanks to higher levels of repair and maintenance work from commercial airlines.

But the marine and offshore engineering segment fell 0.7 per cent due to lower level of work done in offshore projects.

The chemicals cluster boosted output by 0.8 per cent, with the petroleum refining throughput increasing 30.9 per cent on the back of maintenance shutdowns a year ago. But the petrochemicals segment contracted 7.2 per cent.

General manufacturing fell 7.9 per cent, with all segments recording declines, including the miscellaneous industries and printing, as well as food, beverage and tobacco segments.

Electronics output declined 9.2 per cent, with all segments within the cluster down.

Ms Selena Ling, OCBC Bank's head of treasury research and strategy, tipped full-year manufacturing output to shrink by 3 per cent but said March's positive numbers might cause a slight upward revision for first-quarter gross domestic product.

United Overseas Bank economist Barnabas Gan said: "Even as Singapore's tourism and retail sectors experienced the initial negative knock-on effects from the reduced tourism activities, manufacturing confidence may have already deteriorated to date as the global supply chain disruptions continue.

"Moreover, Singapore is highly reliant on trade, and a potential reduction in export demand that is likely to emerge in the coming months should discourage production momentum as well."