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November factory output up 5.3% despite drag from biomedicals

Economists expect manufacturing's breakneck pace of growth to slow in 2018, due partly to base effects

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Manufacturers are ending the year on a cheerful note amid a strengthening global outlook.

Singapore

MANUFACTURERS are ending the year on a cheerful note amid a strengthening global outlook.

But economists expect the sector's breakneck pace of growth to slow in the new year, due partly to base effects. Singapore's factory output expanded 5.3 per cent year-on-year in November.

This was below economists' expectations of an 8.1 per cent increase - largely because of a plunge in biomedical manufacturing output, which tends to be volatile.

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But most other segments continued to record strong expansion, including electronics manufacturing which has been a key driver of economic growth this year. Excluding biomedical manufacturing, overall factory output would have gone up 13.9 per cent.

Manufacturing, which makes up a fifth of the economy, has been a standout performer this year, thanks largely to surging global demand for semiconductors and related gear.

The electronics cluster expanded 27.6 per cent in November over the same month a year earlier, as the semiconductors, computer peripherals and infocomms and consumer electronics segments posted strong growth. Electronics output has surged 37.1 per cent from January to November this year, compared with the same period last year.

Precision engineering, which has also benefited from the pickup in electronics demand, grew 19.9 per cent year-on-year in November, according to the Economic Development Board's data out on Tuesday.

The chemicals cluster's output also increased 7.5 per cent, with all segments recording growth.

However, some manufacturers fared less well. Biomedical manufacturing shrank 23.3 per cent year-on-year, largely due to a 31.1 per cent slide in pharmaceuticals output.

The transport engineering cluster also suffered. Output decreased 8.3 per cent year-on-year in November, dragged down by declines in the land transport and marine and offshore engineering segments.

A report from Moody's Analytics noted that manufacturing activity in Singapore has cooled since August but production is still increasing at a healthy pace, having risen for 15 consecutive months, thanks to the upturn in global demand.

"Although manufacturing should continue to benefit from favourable external conditions, a high base from a year earlier is likely to inhibit growth in coming months," the report noted.

UOB economist Francis Tan also cautioned against over-optimism. "It is without doubt that another month of strong production numbers in November continues the optimism surrounding the recovery story in Singapore's manufacturing industries.

"However, we had previously mentioned that we should not be overly optimistic. Although growth in the manufacturing sector has become more broad-based, the growth rate in the semiconductor segment may be slower due to the high base effects of 2017."