Singapore factory output expands 6.2% in April, led by aerospace production

SINGAPORE’S factory output grew 6.2 per cent year on year in April, led by the transport engineering sector which continued to see good performance this month, according to data from the Singapore Economic Development Board (EDB) on Thursday (May 26).

Excluding the typically volatile biomedical manufacturing sector, industrial production (IP) for the same period grew 7.7 per cent year on year.

In March, overall manufacturing eased a revised 5.1 per cent year on year, as the steep fall in biomedical manufacturing could not offset the aerospace segment’s production surge.

On a seasonally adjusted month-on-month basis, manufacturing output rose by 2.2 per cent. It fell by 1.8 per cent excluding biomedical manufacturing.

Maybank economists Chua Hak Bin and Lee Ju Ye expect manufacturing growth to ease to a low single-digit pace in the coming quarters, given that chip production is operating at near full capacity and global electronics demand is slowing.

“Non-chip sectors, such as petrochemicals, will be weighed down by weakening global demand, particularly due to China’s lockdowns and weaker EU (European Union) growth,” they said, adding that transport engineering will likely continue to be a bright spot due to the resumption of air travel.

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Barclays regional economist Brian Tan believes that the broader softening of the manufacturing sector here reflects some of the drag emanating from the lockdowns in China. This also weighed on non-oil domestic exports in April, he noted.

“While the lockdowns in China will likely weigh on economic activity in the near term, the impact so far has been manageable - the seasonally-adjusted level of electronics output in April was still up by 8.2 per cent from January,” said Tan.

Selena Ling, chief economist and head of treasury research and strategy at OCBC, agreed that April’s performance suggests that any immediate spillover effects from China’s lockdowns have been muted so far.

Tan believes the bigger driver of economic recovery this year will be the relaxation of restrictions on domestic activity and international travel rather than exports and manufacturing, and maintained his 2022 gross domestic product growth forecast of 4.9 per cent.

Even if manufacturing momentum tapers in the coming months, Ling expects that there may be a slight upside risk to her 2022 forecast of 3.8 year on year.

“However, I would prefer to wait for another 1 to 2 months of data for confirmation since the China slowdown story in Q2 and the global supply chain disruptions - partly attributable to the Russia-Ukraine conflict - as well as the aggressive monetary policy tightening by major central banks are still in play,” she added.

The transport engineering sector continued to be the star performer in April, recording a 17.2 per cent year-on-year increase in output, though easing from a 20.7 per cent jump in the previous month.

The aerospace segment expanded 24.2 per cent on the back of higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines as a result of the lifting of border restrictions globally.

Output for the electronics sector eased to 10.4 per cent year on year in April, from 14.4 per cent in the previous month. This was supported by output expansions across all segments except the other electronic modules and components segment.

The other sectors that saw growth were:

• General manufacturing (10.3 per cent)

• Precision engineering (3.5 per cent)

But output fell year on year for:

• Biomedical manufacturing (1.1 per cent)

• Chemicals (3.4 per cent)