Quick take: UOB cuts 2015 industrial output forecast for Singapore to -4.0% from -2.0%

SINGAPORE'S manufacturing output declined 5.4 per cent year-on-year in October, dragged down by a 14 per cent drop in electronics production.

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

Here are some comments by Francis Tan, economist at UOB:

"Singapore's manufacturing sector is not out of the doldrums yet. The sector continues to be weighed down by very weak external demand amid the global deflationary environment. Economic and political uncertainties plaguing the Eurozone, US and China (our top exporting destinations) remain and will continue to drag on the confidence of manufacturers and exporters. In addition, Singapore's still-tight domestic labour market remains a supply-side constraint for production.

"Within the manufacturing clusters, uncertainty plagues the transport engineering, electronics, and precision engineering sectors.

"However, we remain optimistic that there could be some pickup in manufacturing growth in 2016. First, we expect the economic conditions in the US to continue on an improving path. Better jobs numbers, stronger wage gains due to the tighter labour market, and a stronger USD will see the rise of consumption demand from the average American. Second, the basis effects from the low base in 2015 will provide some support for growth.

"We further downgrade our 2015 industrial production forecast growth to -4.0%, from -2.0% earlier, while forecast 2016 industrial production to grow 2.5% on the back of the reasons above.''