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Singapore factory output continues decline with 6.7% drop in June
SINGAPORE'S factory output fell for the second straight month in June, dragged down by the volatile biomedical cluster, according to preliminary data on Friday.
Industrial production was down by 6.7 per cent year on year, although it expanded by 2.1 per cent when biomedical contributions were excluded from consideration.
While the pace of decline eased from May - when the manufacturing sector lost 8.1 per cent on the year before - Singapore’s factory performance in June still fell short of the 2.6 per cent overall contraction forecast by private-sector economists in a Bloomberg poll.
Factory performance was anchored by the linchpin electronics industry, which rebounded from a flat showing in May to expand by 17.3 per cent in June.
The Economic Development Board (EDB), which compiles the monthly manufacturing data, noted that the growth in electronics was driven by the semiconductor segment - thanks to demand from customers in cloud services, data centres and 5G wireless markets.
Alongside optical products and metal precision parts, the higher production of semiconductor equipment also supported a recovery in the precision-engineering cluster, which saw overall year-on-year growth of 9.1 per cent in June, after a 6.6 per cent fall in May.
Howie Lee, an economist at OCBC Bank, observed that semiconductor output has grown year on year for four months, and its prospects are still rosy.
“As global digitalisation accelerates on the back of the pandemic, the need for improved technological infrastructure may be prompting greater demand for semiconductors across the world,” he said.
In contrast, all other manufacturing clusters were under water, with double-digit contractions.
Biomedical manufacturing production plunged by 30.6 per cent in June, on the back of a steep decline in biological products output in the pharmaceutical segment.
That was despite a 5.9 per cent rise in medical technology production, which the EDB attributed to export demand for medical devices amid the deadly novel coronavirus pandemic.
The latest fall in biomedical manufacturing reversed the cluster’s growth of 1.9 per cent in May and finally snapped a months-long winning streak that began in January.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye wrote that “manufacturing disappointed”, as a high base effect took a toll on the performance by pharmaceuticals, although they also noted that electronics has “surged at the fastest pace in two years”.
Otherwise, output in the chemicals cluster fell by 12.1 per cent, with petrochemicals the only segment to post growth. Speciality and other chemicals, and petroleum, shrank on the back of plant maintenance shutdowns and a pandemic-related drop in export orders, the EDB said.
Broad-based contractions in transport engineering drove the cluster to plummet by 33.9 per cent, as the pandemic capped the volume of aircraft repair and maintenance work and sharply curtailed the movement of foreign workers in marine and offshore engineering.
Meanwhile, general manufacturing shed 13.9 per cent on deteriorating output across the board, including lower production of construction-related products.
On a seasonally adjusted, monthly basis, manufacturing output inched up by 0.2 per cent in June, but shrank by 0.8 per cent with biomedical manufacturing excluded.
To be sure, coronavirus containment measures capped the number of Singapore workers who could return to their workplaces in June, after a two-month quasi-lockdown, pointed out Barnabas Gan, an economist at United Overseas Bank.
“Coupled with supply-chain disruptions and a poor external environment, it is of no surprise that manufacturing pace saw another month of contraction.”