SINGAPORE'S worse-than-expected factory output in July suggests that more challenges lie ahead for manufacturing, said ANZ economist Weiwen Ng.
Data released by the Economic Development Board on Wednesday showed that industrial output declined 6.1 per cent year on year during the month, with all clusters save chemicals posting a drop in production.
Said Mr Ng: "The breadth and depth of slowdown in across most clusters suggest speed bumps ahead for industrial production amid regional weakness.
"Given a weaker yuan and the ongoing trade recession, Singapore's exports which is highly leveraged to China will be vulnerable, essentially foreshadowing further weakness in industrial production."
He added that the ongoing consolidation in the IT industry could possibly see electronic firms domestically restructure their global operations away from Singapore.
"In our view, growth and policy outturns in China - to which Singapore's export market is highly leveraged - hold the key to near-term trade performance. With Singapore's economy essentially flat lined in the first half of the year, these external headwinds could potentially weigh on the economy in the second half," said Mr Ng.