Slow full-year growth seen after Nov data

Singapore

SINGAPORE'S manufacturing output for November fell by 5.5 per cent year on year, way below consensus estimates, making it the 10th straight month of decline and putting a dampener on an already subdued festive mood.

A poll of 17 economists by Bloomberg had projected a 3 per cent contraction, while a Wall Street Journal poll of four analysts had estimated a 3.6 per cent decline.

Most analysts believe the weak industrial output will continue into early 2016, thereby adding pressure on Singapore's growth.

Total manufacturing output in November was dragged down by an 11.2 per cent contraction in the transport engineering cluster and an 11.1 per cent fall in electronics output, year on year.

Excluding the volatile biomedical manufacturing cluster, output fell by a larger 6.4 per cent, the Economic Development Board (EDB) said on Thursday.

The electronics cluster, which retains the largest weight of 33.4 per cent on the index, stayed in contraction mode again in November. All electronics segments except data storage and other electronic modules & components registered output declines. Computer peripherals output fell 22.8 per cent.

The transport engineering cluster was dragged down by a 20.7 per cent fall in the land engineering segment, as well as a 20.1 per cent fall in marine & offshore engineering output.

Biomedical manufacturing, the second-largest component on the index, slid 1.3 per cent in output, due to a 9 per cent drop in the pharmaceuticals segment.

Chemicals was the best-performing cluster, rising 11.6 per cent in November from a year ago, lifted by the petroleum and petrochemicals segments, which grew 20.9 per cent and 12.2 per cent respectively.

This was due to the low base effect last year as some plants shut down for maintenance, said the EDB, which added that the other chemicals segment declined 6 per cent as a result of lower demand for glass products.

Both the precision engineering and general manufacturing clusters' output fell 4.3 per cent in November.

After adjusting for seasonal factors, industrial production fell 3.6 per cent month on month in November. If biomedical manufacturing is excluded, output would have slid one per cent.

Analysts The Business Times spoke with projected full-year 2015 GDP growth to be between 1.8 to 2 per cent.

CIMB private banking economist Song Seng Wun noted that as "manufacturing remains in recession", it will "continue to exert a downward pressure on Singapore's gross domestic product (GDP) growth", he said, adding that he expects 2015 GDP growth to be around 1.8 to 1.9 per cent, the slowest in six years.

ANZ Research economist Ng Weiwen also had similar sentiment: "Singapore's growth looks set to remain in a soft patch amid an uncertain external demand outlook, which has led to tepid exports and continued slide in manufacturing output."

He expects the manufacturing outlook to remain weak in 2016 due to cyclical headwinds and structural factors such as the US recovery being led by services, as well as China increasingly engaging in vertical integration in domestic production. This means both the United States and China are importing less from this region, which will weigh on manufacturing output, Mr Ng said.

UOB economist Francis Tan wrote in his flash note that the current manufacturing output downtrend for 10 consecutive months is the longest period of contraction UOB has observed since its data started in 2003. But in terms of severity, it is relatively smaller than during the 2008-2009 crisis period, he said.

"Singapore's manufacturing sector is not out of the doldrums yet. However, we remain optimistic that there could be some pick-up in manufacturing growth in 2016. First, we expect the economic conditions in the US to continue on an improving path. . . Second, the basis effects from the low base in 2015 will provide some support for growth. We maintain our 2015 industrial production forecast of a 4 per cent contraction, while forecast 2016 industrial production to grow 2.5 per cent."