SINGAPORE’S factory output in October surpassed market expectations with a 7.4 per cent year-on-year rebound after a year-long slump, data from the Singapore Economic Development Board (EDB) showed on Friday (Nov 24).

September’s industrial production has been revised to a 1.1 per cent contraction, from an earlier reported 2.1 per cent decline.

Excluding the typically volatile biomedical manufacturing, output grew 7.3 per cent year on year.

On a seasonally adjusted month-on-month basis, factory output rose 9.8 per cent; the figure is 4.4 per cent, excluding biomedical manufacturing.

Private-sector economists polled by Bloomberg had expected a 2.3 per cent decline.

DBS economist Chua Han Teng said: “We think that Singapore’s manufacturing recovery is underway, but will still have to watch for more data points to better gauge the pace of the upturn.”

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Most clusters, other than chemicals and precision engineering, registered growth.

Electronics was the best-performing cluster in October, with output expanding 14.8 per cent year on year, extending the previous month’s 12.7 per cent growth. This was led by the semiconductor segment, even as other segments declined, said EDB.

Barclays senior regional economist Brian Tan cautioned against “reading too much into the swings” in the electronics sector, noting that electronics output has been volatile, even if the extent has not been the same as the biomedical segment.

“That said, the latest reading brings the seasonally adjusted level of electronics production above trend levels again, approaching the highs of early 2022, and is in line with the broader regional trend of a gradual upturn in the tech cycle.”

Biomedical manufacturing output rose 5.1 per cent on the year in October, a turnaround from the previous month’s 19 per cent tumble, as both the pharmaceuticals and medical technology segments grew.

Output also grew year on year in these other clusters:

• Transport engineering (12 per cent)

• General manufacturing (4.3 per cent)

In contrast, chemicals output dipped 1 per cent year on year in October, easing from the 13 per cent contraction in the previous month.

The contraction in precision engineering also eased to 2.2 per cent on the year, compared with September’s 10.8 per cent decline.

DBS’ Chua said while the important electronics cluster is showing tentative signs of a turnaround, activity remains uneven across manufacturing clusters, amid an uncertain global economic environment. “The global economic backdrop is still uncertain, amid high interest rates in advanced economies, bumpy conditions in China, and lingering geopolitical tensions that could disrupt supply chains, which could keep Singapore’s manufacturing recovery fragile.”

UOB economists Alvin Liew and Jester Koh said that electronics exports may turn positive by December, having clocked an improvement in October with a narrower contraction.

They added that the year-on-year manufacturing recovery in 2024 will be partly driven by base effects given the downturn in 2023, but sequential momentum could remain “fundamentally weak” in the first half of the year as external demand continues to be weighed down by tight financial conditions globally.

RHB acting group chief economist Barnabas Gan disagrees, however, saying that he expects manufacturing momentum to improve into the next two quarters on the back of stronger global trade and manufacturing trends already seen in the year to date. “We remain positive on electronics, transport engineering and general manufacturing industries in the next six to 12 months. Singapore will benefit immensely from China’s purported economic recovery in 2024.” Still, sticky inflation in the near term remains a risk, Gan felt, given the “upside bias” for oil prices.