S'pore factory output shrinks for 2nd month on biomed weakness

Overall production down 6.7% in June, but improves on May's revised 8.1% decline

The medical technology segment grew 5.9 per cent last month to meet export demand for Covid-19-related devices. But biomedical manufacturing saw one of the largest falls, with output tumbling 30.6 per cent.
The medical technology segment grew 5.9 per cent last month to meet export demand for Covid-19-related devices. But biomedical manufacturing saw one of the largest falls, with output tumbling 30.6 per cent. ST FILE PHOTO

Factory output declined for the second straight month in June on the back of weakness in biomedical manufacturing, according to data yesterday.

Overall production fell 6.7 per cent compared with the same month last year, but that was a slight improvement on the revised 8.1 per cent drop in May.

If biomedical manufacturing is excluded, output would have grown 2.1 per cent.

United Overseas Bank economist Barnabas Gan noted that phase one of Singapore's reopening began last month, so only a third of the workforce was able to resume operations.

"In addition, Singapore's export-oriented economy continues to be negatively affected by supply chain disruptions and the poor external environment then."

Biomedical manufacturing saw one of the largest falls, with output tumbling 30.6 per cent, the Economic Development Board data noted.

The medical technology segment grew 5.9 per cent to meet export demand for Covid-19-related devices, but pharmaceuticals contracted 37.4 per cent with lower output of biological products.

Biomedical manufacturing grew 26.6 per cent compared with the same period a year ago.

OCBC Bank economist Howie Lee noted: "Global efforts to combat the coronavirus have now been ongoing for at least six months and the initial months of the pandemic saw many countries attempting to secure and stockpile critical medical supplies. From here on, however, we expect many countries to have achieved reasonable adequacy... and that may result in the stabilisation of demand for Singapore's biomedical goods."

On the other hand, output in the electronics cluster rose 17.3 per cent, largely due to the semiconductors segment expanding 26 per cent on the back of demand from cloud services and data centres and 5G roll-outs. But the other electronic modules and components segment, as well as computers and data storage, contracted.

Mr Lee said: "As global digitalisation accelerates on the back of the pandemic, the need for improved technological infrastructure may be prompting greater demand for semiconductors across the world."

The precision engineering cluster also expanded, up 9.1 per cent, while the machinery and systems segment grew 11.1 per cent on account of higher production of semiconductor equipment. The output for precision modules and components also increased.

However, chemicals production fell 12.1 per cent year on year last month. The other chemicals, specialities and petroleum segments contracted on the back of plant maintenance shutdowns and lower export orders amid the Covid-19 outbreak.

General manufacturing also saw output falling 13.9 per cent last month. All segments within the cluster recorded declines, such as the food, beverage and tobacco category and the printing and miscellaneous industries sector, which produced fewer construction-related products.

Transport engineering also saw a large drop in output, down 33.9 per cent last month, with the aerospace segment contracting 23 per cent as the volume of aircraft repair and maintenance work remained low amid the pandemic.

Marine and offshore engineering shrank 53.5 per cent as movement restrictions at foreign worker dormitories hit shipyards.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said they remain positive on the manufacturing outlook and noted that this downturn affects services more than factories, unlike the global financial crisis.

"Robust demand for semiconductors and IT equipment will likely support growth for the rest of the year. Production for pharma and medical technology is expected to remain healthy, given the global search and demand for a vaccine," they added.

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A version of this article appeared in the print edition of The Straits Times on July 25, 2020, with the headline S'pore factory output shrinks for 2nd month on biomed weakness. Subscribe