Factory output contracts for first time in a year

General manufacturing saw a rise of 3.2 per cent year on year, with the miscellaneous industries segment up 5.8 per cent.
General manufacturing saw a rise of 3.2 per cent year on year, with the miscellaneous industries segment up 5.8 per cent.LIANHE ZAOBAO FILE PHOTO

January's 3.1% drop due to weaker electronics, precision engineering sectors as well as trade tensions

Weaker performances by the electronics and precision engineering sectors sent manufacturing output down last month - the first year-on-year fall since December 2017.

Last month's reading was on a par with the dip predicted by economists in a Bloomberg poll.

United Overseas Bank economist Barnabas Gan said the 3.1 per cent drop might be partly due to the high base effect in January last year, when manufacturing output grew 18.4 per cent year on year.

Trade tensions also played a role in the manufacturing slowdown.

"The ongoing uncertainties in US-Sino trade tensions and the fading technology boom would likely persist into the first half of the year," Mr Gan said.

He added that these external factors appear to have weighed on both manufacturing and trade activities in key Asian economies.

If biomedical manufacturing was excluded, output fell by a sharper 5.9 per cent last month, said the Economic Development Board (EDB) yesterday.

HSBC chief Asean economist Joseph Incalcaterra said: "Leading indicators such as worldwide semi-conductor billings and business expectations for the Singapore manufacturing sector point to sustained industrial production weakness over the short term.

"That said, the recent stabilisation in commodity prices should provide some support for oil-related sectors such as the petrochemical industry, and good news from US-China trade negotiations may reduce additional downside trade risks."

Maybank Kim Eng economist Lee Ju Ye agreed: "We think manufacturing may register near zero growth in 2019, following two years of robust growth."

Last month's output declined despite the transport engineering sector posting growth of 20.2 per cent.

The marine and offshore engineering segment expanded 26.9 per cent due to a higher level of work done in offshore projects and shipbuilding and repairing, the EDB noted.


Aerospace also grew, expanding 17.4 per cent on the back of more repair and maintenance activities from commercial airlines.

Biomed manufacturing lifted output as well, rising 10 per cent year on year, while pharmaceuticals expanded 13.5 per cent, driven by higher production of active ingredients and biological products.

Sustained export demand helped boost medical technology production by 1.5 per cent.

The chemicals industry saw an uptick as well, up 2 per cent compared with last year.

But the electronics cluster's output fell 13.7 per cent last month.

Precision engineering also fell, declining 15.7 per cent, with the machinery and systems segment falling by 20.8 per cent due to lower production of semiconductor equipment.

The precision modules and components segment dipped 7.4 per cent, pulled down by reduced output of optical instruments and dies, moulds, tools, jigs and fixtures.

General manufacturing registered a rise of 3.2 per cent year on year, with the miscellaneous industries segment growing 5.8 per cent, propelled by higher production of batteries and structural metal products.

Festive demand boosted output in the food, beverages and tobacco segment by 4.6 per cent, but printing fell 11.5 per cent.

Manufacturing production rose 0.9 per cent in January on a seasonally adjusted month-on-month basis, but dipped 0.4 per cent with the more volatile biomedical manufacturing sector stripped out.

Ms Lee noted: "2019 will be a year of two halves. We are pencilling a brief manufacturing downturn in the first half, including a negative first quarter. The second half may see some rebound in manufacturing after a trade deal."

Correction note: This article has been edited for clarity.

A version of this article appeared in the print edition of The Straits Times on February 27, 2019, with the headline 'Factory output contracts for first time in a year'. Print Edition | Subscribe