SINGAPORE’S industrial production (IP) grew 1.1 per cent on year in January, in a turnaround from December 2023’s 2.4 per cent decline. This came even as output in the key electronics sector fell, Economic Development Board (EDB) data showed on Monday (Feb 26).

January’s performance fell short of private-sector economists’ median estimate of a 3.7 per cent expansion in a Bloomberg poll.

Excluding the volatile biomedical manufacturing cluster, factory output jumped 5.4 per cent year on year in the first month of 2024, widening from the 0.6 per cent growth observed in December.

January’s prints come after Singapore’s manufacturing Purchasing Manager’s Index (PMI) improved again, as regionwide factory activity continued to recover.

DBS economist Chua Han Teng warned that factory improvement could be “gradual and fragile”, given the uncertain global economic environment. But he expects better prospects for this year, against 2023’s full-year contraction.

The month’s performance “marked a good start to 2024 for Singapore’s manufacturers”, he said.

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RHB acting group chief economist and head of market research Barnabas Gan similarly expects stronger manufacturing momentum this year, forecasting a more material uptick from Q2. This is supported by the bank’s above-consensus growth forecasts for the US and China, he added.

He is unworried, despite January’s lacklustre performance against market expectations. Highlighting the discrepancy between the “substantial” non-oil domestic exports expansion and the softer IP data in January, he said this points to continued “healthy” global demand for Singapore-produced goods, with manufacturers needing to ramp up production in H1 2024 to keep up.

This thus suggests that IP activities will continue to gain momentum on the back of a global recovery in trade, he said, adding the caveat that February data will likely reflect a seasonality-influenced slowdown.

OCBC chief economist Selena Ling cautioned: “One should not read too much into one month’s poor performance – if the IP can sustain anywhere close to the January 2024 levels, then February should rebound.”

She noted that the Chinese New Year holidays fell in January rather than February last year. Given the seasonal effects, it may be better to look at the average growth for the two-month period instead, she said.

Factory output in the key electronics sector slid 3.4 per cent from the year-ago period in January, reversing from December’s 6.2 per cent year-on-year gain. Most segments recorded losses for the month, with only the infocomms and consumer electronics segment growing by 23.8 per cent.

Still, DBS’ Chua believes that electronics manufacturers should benefit from the turnaround in global electronics recovery, noting signs of demand from rising new orders, new export orders and accumulating backlog orders.

Other clusters that recorded falls were biomedical manufacturing (-25.9 per cent), and general manufacturing (-3.4 per cent).

In general manufacturing, the miscellaneous industries (7.1 per cent) and printing (5.8 per cent) segments rose, with the former recording higher production of construction-related materials. The food, beverages and tobacco segment fell 9.7 per cent, largely led by lower production of dairy products and beverage concentrates.

Production in the remaining clusters grew year on year:

• Transport engineering (43.5 per cent)

• Precision engineering (27.7 per cent)

• Chemicals (3.8 per cent)

Transport engineering’s aerospace segment output surged 69.1 per cent from January 2023’s low base, which had been caused in part by component shortages. The marine and offshore engineering segment grew 27.6 per cent, supported by a higher level of activity in the shipyards and increased production in oil and gas equipment. Conversely, the land segment contracted 4.3 per cent.

Both the machinery and systems segment as well as the precision modules and components segment of precision engineering recorded output growth in January.

As for the chemicals cluster, all segments registered increases in production except for petroleum, which contracted 6.2 per cent due to plant maintenance shutdowns.

On a seasonally adjusted, monthly basis, manufacturing output declined 5.7 per cent in January, worsening from December’s revised 1.3 per cent contraction. Excluding biomedical manufacturing, production dropped 6.6 per cent on the month on a seasonally adjusted basis, reversing from the 2.1 per cent growth recorded in the previous month.