SINGAPORE - Singapore's manufacturing output shrank in May, reversing two straight months of expansion, as the pace of growth in the volatile biomedical cluster fell sharply.
Overall production dropped 7.4 per cent year on year in May after increasing 13.6 per cent in April, according to data released by the Economic Development Board on Friday (June 26).
The drop was in sharp contrast to expectations of continued expansion. Economists had tipped a 6.6 per cent rise, according to the median of their forecasts in a Reuters poll.
Mr Euben Paracuelles, economist at Nomura International, said; “We expect the decline to be sharper in June and therefore a large drop in GDP growth in the second quarter.”
Biomedical output slowed last month to 5.9 per cent from a 100.5 per cent surge a month earlier, as growth in the medical technology segment fell 20.1 per cent, in part due to the tighter circuit breaker measures imposed during the period.
The pharmaceuticals segment, however, expanded 14.7 per cent on the back of higher production of active pharmaceutical ingredients and biological products.
The biomedical sector, which grew in output by 49.9 per cent year to date, had held up Singapore's manufacturing production for the last couple of months. Overall output expanded 13.6 per cent in April and 21.8 per cent in March, after a 1.1 per cent drop in February.
Excluding biomedical manufacturing, May output was down 10.4 per cent.
Nomura had argued that the surge in pharmaceutical output over the past few months was driven mainly by a change in the product mix rather than a rise in demand related to the Covid-19 outbreak.
“Further out, we expect manufacturing growth to worsen sharply into double-digit negative territory in June, as growth in pharmaceutical output should turn negative on waning support from the change in the product mix and a high base effect, despite the gradual economic reopening which began on June 2,” said Mr Paracuelles.
Electronics production fell 1 per cent year on year in May, even as the semiconductors segment grew 1.6 per cent, supported by demand from cloud services and data centres, as well as 5G markets. By contrast, the rest of the electronics segments contracted.
Output of the electronics cluster has shrunk 3.6 per cent in the first five months of this year.
Still bigger drops in May came from transport engineering, where output plunged 40.7 per cent, and general manufacturing with a 26.9 per cent fall.
Mr Barnabas Gan, economist at UOB Group, blamed the steeper-than-expected declines in transport engineering and general manufacturing to the circuit breaker measures which spanned the entire month of May.
“There still remains a high degree of uncertainty over Singapore’s economic prospects. The very nature of the pandemic is fluid, and it could still be more severe and protracted than previously anticipated,” he said.
Precision engineering output declined 5.3 per cent year on year last month, dragged down by precision modules and components segment’s 23 per cent contraction as Covid-19 dampened demand and disrupted operations locally and in key export markets.
Chemicals production fell 13.5 per cent year on year with all segments, including petrochemicals and petroleum output contracting due to weak demand and plant maintenance shutdowns.
Overall factory production decreased 16.5 per cent on a seasonally adjusted month on month basis. Excluding biomedical manufacturing, month on month output fell 6.2 per cent.