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'Circuit breaker' a culprit as Singapore factory output posts 7.4% drop in May
SINGAPORE'S factory output snapped a two-month winning streak in May to slide unexpectedly into negative territory, with the novel coronavirus pandemic largely fingered as the culprit.
Industrial production fell by 7.4 per cent year on year, on the back of a broad-based contraction in almost all clusters, according to preliminary data released on Friday. The manufacturing contraction tracked a 4.5 per cent drop in non-oil domestic exports reported earlier this month.
Still, the drop bucked the 7.7 per cent expansion tipped by private analysts in a Bloomberg poll and came even as April's growth was revised up to 13.6 per cent, from 13 per cent before.
The Economic Development Board (EDB), which compiles the monthly manufacturing data, named Singapore's two-month "circuit breaker" quasi-lockdown - which ended in June - as a drag on general manufacturing and medical technology production.
Marine and offshore engineering output suffered from a work slowdown in shipyards amid the "circuit breaker", while airlines' grounded fleets drove a contraction in aerospace engineering on lower volumes of repair and maintenance work, the EDB said.
The virus pandemic was also cited as a lead weight on market demand for specialties and other chemicals, as well as for precision modules and components.
May's factory decline further widened to 10.4 per cent after excluding biomedical manufacturing, which was once again the only cluster to expand. Biomedical manufacturing grew by 5.9 per cent, buoyed by higher production of active pharmaceutical ingredients and biological products.
The weakness in general output in the second quarter “is likely more reflective of the general posture of global demand, separate from the ups and down in biomedical output, which can distort the headline figures”, said JPMorgan research analyst Ong Sin Beng.
Similarly, Barnabas Gan, economist at United Overseas Bank, called the virus and the possibility of intensifying trade tensions “formidable drags to Singapore’s overall manufacturing environment”.
“However, some interim support from production and exports of biomedical products given the uptick in global demand for medical necessities may cushion the downside,” he added.
Meanwhile, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said: “The manufacturing outlook is improving as countries exit from lockdowns and consumer spending normalises. Demand for pharmaceuticals will stay resilient while semiconductor production will be supported by data centres and cloud services.”
Output in the linchpin electronics cluster was down by 1 per cent on year, despite the lift from semiconductors - the only segment in the black - which grew by 1.6 per cent on demand from cloud services and data centres, as well as demand for 5G wireless technology.
Yet, the higher production of semiconductor equipment also failed to stave off a decline in precision engineering. The precision engineering cluster's overall output fell by 5.3 per cent, dragged down by double-digit contraction in the precision modules and components segment.
Chemicals output was down by 13.5 per cent in May, with the EDB noting that weak demand and plant maintenance shutdowns affected the petrochemicals and petroleum segments.
Production in the transport engineering cluster plunged by 40.7 per cent year on year, while the general manufacturing cluster shrank by 26.9 per cent.
On a seasonally adjusted, monthly basis, Singapore's factory output slipped by 16.5 per cent in May, or 6.2 per cent when the volatile biomedical manufacturing cluster was left out.