Surprise dip in Sept factory output here

Output of the key electronics cluster fell 5.5 per cent. Computer peripherals production shrank the most, while output of semiconductors, data storage and other electronic modules and components also declined.
Output of the key electronics cluster fell 5.5 per cent. Computer peripherals production shrank the most, while output of semiconductors, data storage and other electronic modules and components also declined.FILE PHOTO: LIANHE ZAOBAO

Manufacturing output slips 0.2%, against analyst expectations of 3.5% rise

Singapore's factory output saw a small but surprise drop last month, ending a winning run that anchored the Republic's growth for most of this year.

This came even as the Monetary Authority of Singapore (MAS) said it foresees slower economic growth ahead and a shift in growth drivers.

Manufacturing output fell 0.2 per cent last month compared with a year ago, reversing a 3.7 per cent rise in August and marking its first drop since December last year.

The latest Economic Development Board (EDB) figures yesterday stand in stark contrast to analyst expectations of a 3.5 per cent increase, according to a Bloomberg poll.

MAS expects slower economic growth with new drivers.

It said in its macroeconomic review: "The modern services cluster is expected to contribute more to growth in 2019 as digitalisation and innovation continue."

Economists noted that manufacturing output seems to be falling more quickly than expected.

According to the EDB numbers, four out of six clusters logged declines, with biomedical manufacturing seeing the largest year-on-year drop of 9.7 per cent last month.

The medical technology segment shrank 5.8 per cent while pharmaceuticals saw a bigger 11.1 per cent contraction.

Output of the key electronics cluster fell 5.5 per cent, with all segments except infocommunications and consumer electronics recording lower production.

Computer peripherals production shrank the most, while output of semiconductors, data storage and other electronic modules and components also declined.

Maybank Kim Eng economist Chua Hak Bin said electronics production contracted with the technology cycle losing steam, while the trade war between the United States and China is disrupting supply chains in the sector.

"Earlier growth supported by the electronics spurt last year seems to be pulling back," he said.

UOB senior economist Alvin Liew added that the impact of trade tensions still weighs on the outlook ahead.

"While there is a possibility that some production will be relocated to South-east Asia, offsetting the negative impact to trade, factories don't pop up overnight," he said.

"That time lag between relocating production and reaping the relocation benefits will still mean downside growth risk to Singapore's manufacturing, at least in the early part of 2019."

Last month, output in chemicals also dropped 7.1 per cent. Although the specialities segment grew, due to higher production of industrial gases and mineral oil additives, other segments saw declines.

General manufacturing output fell as well, with output down 2.7 per cent compared with last year.

Under this cluster, the food, beverages and tobacco segment saw higher output, though other segments like printing logged declines.

There were a few bright spots, however. Transport engineering output rose 39.4 per cent, with the marine and offshore engineering segment expanding the most.

Precision engineering output was up 4.1 per cent as well.

Overall, excluding biomedical manufacturing, output grew 1.9 per cent year on year.

On a seasonally adjusted month-on-month basis, manufacturing output decreased by 4.9 per cent.

A version of this article appeared in the print edition of The Straits Times on October 27, 2018, with the headline 'Surprise dip in Sept factory output here'. Print Edition | Subscribe