SINGAPORE - The growth in Singapore's manufacturing output slowed further in August, as production in the key electronics sector shrank for a second month in a row.
Weakness in the electronics cluster, which represents 40 per cent of Singapore’s industrial output, may drag the overall performance of the export-driven economy as rising inflation and interest rate hikes suppress consumer demand worldwide, analysts said.
Total output grew 0.5 per cent last month year on year after a revised 0.8 per cent expansion in July, according to data released by the Economic Development Board (EDB) on Monday.
The pace of growth in August was the slowest since September 2021, when output declined by 2 per cent.
Excluding biomedical manufacturing, output shrank 1.2 per cent, EDB said.
However, the overall output growth was better than the 0.7 per cent drop analysts had predicted in a Bloomberg poll.
The key electronics sector saw its production declining by 7.8 per cent, more than the 5.9 per cent drop in July.
All segments within the sector recorded a fall in output on the back of softening demand, led by a 19.3 per cent slide in the production of electronic modules and components.
Infocomms and consumer electronics output fell 11.7 per cent, followed by a 6.6 per cent drop for semiconductors - a third straight month of decline - and a 5.5 per cent fall in computer peripherals and data storage.
Concerns of a sharp global semiconductor down cycle have been on the rise after major chip companies, such as Micron, Intel, and Nvidia, predicted a weaker demand outlook for the sector through 2022 and probably 2023 as well.
Chemicals output decreased 11.2 per cent, as the specialties chemicals segment posted a 14 per cent drop.
Still, the petroleum segment grew 8.1 per cent on account of higher demand for jet fuel driven by the relaxation of global air travel restrictions.
Both the electronics and chemicals sectors have been hit by slowing global demand, especially from China, which accounts for nearly 15 per cent of Singapore's exports.
China's economic growth slowed to 2.6 per cent in the first half, nearly half of the 5.5 per cent target set by Beijing for the whole of 2022.
Singapore's biomedical manufacturing rose 11.1 per cent in August year on year, led by the medical technology segment, which expanded 18.9 per cent amid higher demand for medical devices from the United States and China.
The pharmaceuticals segment grew 6.4 per cent due to a different mix of active pharmaceutical ingredients being produced.
The manufacturing sector accounts for around 22 per cent of Singapore's gross domestic product (GDP) - the total value of goods produced and services provided in a country during one year.
Since June, industrial production has eased off considerably, after a steady start in the early months of 2022.
Output growth slowed to 2.6 per cent in June, following a 10.2 per cent jump in May this year.
Production grew 5.6 per cent in the first half of 2022, nearly half of the 13.3 per cent pace it clocked last year when the economy expanded 7.6 per cent.
Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said chipmakers are bracing for further demand pullbacks amid recession fears and challenging market conditions.
Growing global recession fears amid the aggressive interest rate hikes by major central banks and the ensuing market upheaval may continue to weigh on business and consumer confidence and in turn global demand conditions, she noted.