Singapore's manufacturing declines more than expected in Q4

SINGAPORE's manufacturing sector declined even more than expected in the fourth quarter, contracting by 6.7 per cent on a year-on-year basis, according to the Ministry of Trade and Industry (MTI).

This compared with the official estimate of 6 per cent contraction made in January, based on data from October and November 2015. It continues to be weighed down by a drop in the output of the transport engineering and electronics cluster, which had also caused the sector to contract by 6 per cent in the third quarter.

The construction sector, on the other hand, outperformed expectations by growing 4.9 per cent, picking up from the 3 per cent growth in the third quarter. MTI in its estimates had expected it to grow by 2.2 per cent.

Meanwhile, the services sector expanded by 2.8 per cent, in line with expectations.

Within the sector, wholesale and retail trade continued to shine as the fastest-growing segment, recording a 6.8 per cent growth in the fourth quarter, up from the 6.4 per cent growth in the third quarter. This was due to stronger growth in the wholesale trade segment, said MTI on Wednesday.

For the full year, the manufacturing sector contracted by 5.2 per cent, reversing its 2.7 per cent growth in 2014. All clusters except chemicals saw a decline in output, MTI said.

The construction sector moderated to 2.5 per cent from 3.5 per cent in 2014, no thanks to lower volume of private industrial and residential building activities.

Services-producing industries expanded by 3.4 per cent, easing from the 3.6 per cent growth in 2014, supported mainly by wholesale and retail trade and finance and insurance sectors.

The ministry is expecting the outlook for the manufacturing sector to remain weak on the continued slowdown in China and lower oil prices, though the finance and insurance as well as wholesale trade sectors will likely provide support.

It said in a statement: "First, even though global growth is expected to improve, the continued slowdown in China, the services-driven nature of growth in the US, as well as the trends of in-sourcing in China and the US, may mean that external demand for our exporters may not see a significant boost this year.

"Second, lower oil prices have weakened the prospects for new rig orders for firms in the marine & offshore segment, and heightened the risks of further deferments and cancellations of existing orders. There could also be negative spillover effects on firms in the precision engineering cluster that support the oil & gas industry."

The outlook for the construction sector is also more gloomy in 2016, on a reduction in contracts awarded in 2015 and "continued sluggishness" in demand from the private sector. The ministry also expects labour constraints to continue to weigh on labour-intensive services sectors such as food services.