Surprise 7.6% climb in November factory output

Volatile biomedical cluster drives growth, but analysts say trend is unlikely to continue

Singapore's factory output surged by 7.6 per cent year on year last month, continuing its rise despite talk of a slowdown in the manufacturing sector as the global electronics market quietens.

Analysts doubt that the trend can continue, with some predic-ting a worse 2019 for the manufacturing sector.

November's performance surprised economists, who had expected output to grow by 4.2 per cent, a Bloomberg consensus poll showed. It also surpassed October's 5.5 per cent growth, which was revised up from an earlier estimated 4.3 per cent rise.

Excluding the more volatile biomedical manufacturing sector, industry output expanded by 5.3 per cent year on year last month, according to data from the Singapore Economic Development Board (EDB).

Manufacturing grew by 2.8 per cent on a month-on-month basis in November.

The biomedical cluster remains the biggest growth driver, expanding by 18.5 per cent year on year, higher than October's 13.1 per cent rise. Within this category, pharmaceuticals posted the biggest growth of 23.9 per cent year on year, with the production of active pharmaceutical ingredients and biological products, said the EDB.

SIM Global Education senior lecturer Tan Khay Boon said that as overall growth was supported mainly by the pharma cluster, last month's above-par performance might not be sustainable because the pharma industry is known for its high volatility.

The electronics industry, which shrank in September and October, ended its lacklustre streak last month, growing by 11.2 per cent.

This surge came on the back of a sharp 16.5 per cent growth in semiconductors, 12.6 per cent growth in infocomms and consumer electronics, and 3 per cent growth in the other electronic modules and component segments.

UOB senior economist Alvin Liew, who had forecast total manufacturing to shrink by 2 per cent last month, said the unexpected boost to the electronics cluster came from the temporary easing of global trade tensions.

 
 
 
 

"We may have underestimated the temporary positive impact of the 90-day ceasefire between the United States and China on additional tariffs that set the stage for another round of front-loading of imports before the March 1, 2019, deadline," he said.

In the ongoing trade war, front-loading is a practice in which American and Chinese manufacturers accelerate the orders of production and shipment to avoid tariffs.

OCBC Bank's head of treasury research and strategy, Ms Selena Ling, said that when such activities eventually subside, the trend of better-than-expected manufacturing growth may not carry over to next year.

Mr Liew added that conversely, there could be a "harsher payback" for the manufacturing sector when the truce expires and the additional tariffs kick in.

The chemicals industry also ended its two-month decline, growing 3.4 per cent year on year in November.

The transport engineering industry grew by 11.3 per cent year on year, with all segments recording positive growth.

The marine and offshore engineering segment saw the biggest boost, expanding by 26.6 per cent, compared with the low base in November last year.

General manufacturing shrank slightly, by 0.8 per cent, while precision engineering output fell by 8.2 per cent last month - the first decline after 27 straight months of growth.

A version of this article appeared in the print edition of The Straits Times on December 27, 2018, with the headline 'Surprise 7.6% climb in November factory output'. Print Edition | Subscribe