The manufacturing recession continues to deepen with factory production, new orders and employment all falling further last month.
The Purchasing Managers' Index (PMI), an early indicator of manufacturing activity, contracted for a seventh straight month to post a reading of 49.0 last month, slightly below December's 49.5 reading. A reading below 50 indicates contraction in the sector. Said Singapore Manufacturing Federation secretary-general Lam Joon Khoi: "Unless businesses transform, this negative trend will continue."
Last year, industrial production contracted 5.2 per cent over 2014, the worst performance in 14 years.
Meanwhile, Singapore's overseas rivals in the value-added segment, South Korea and Taiwan, posted output declines of 0.7 per cent and 1.4 per cent respectively.
Mr Lam is worried that Singapore's factories may lose their competitiveness unless they revamp their business models.
Unless businesses transform, this negative trend will continue.
MR LAM JOON KHOI, Singapore Manufacturing Federation secretary-general, on the need to revamp business models.
"At the moment, however, there are still many small and medium-sized enterprises that are not yet ready, or are at a loss as to how to create value," he said.
Economists are calling for factories to brace themselves for a very cold winter as Asia's trade recession shows no sign of reversal while China continues to reconfigure its supply chain to bring more production onshore.
ANZ economist Weiwen Ng noted that China's PMI is also contracting: "This suggests that China is transmitting this trade shock to the rest of the world."
DBS economist Irvin Seah said: "Although, historically, manufacturers front-load their orders ahead of the Chinese New Year, chances are high that this festive season will be a relatively quiet one."
The Economic Development Board (EDB) noted in its year-in-review report yesterday that the manufacturing sector's share of national output fell from a high of 27.8 per cent in 2005 to 18.4 per cent in 2013 and 2014.
The agency, which focuses on pulling foreign direct investment into Singapore, said it is exploring ways to "seize new manufacturing opportunities", as a result of advanced technologies such as robotics. "Weak global demand is likely to continue affecting Singapore's manufacturing output, but EDB is confident about the underlying health of the manufacturing sector," it said.
As for those manufacturers who are looking to next month's Budget for some support amid the crunch, OCBC economist Selena Ling said: "It remains to be seen if anything will be done for the manufacturing sector given that policymakers can only offer relief but not fundamentally change the global demand conditions."