Singapore factory output growth slows sharply to 2% in January, below expectations

SINGAPORE manufacturing growth cooled in January to just 2 per cent year on year - down from 16.7 per cent expansion in the month prior, and well below the forecast of 11.6 per cent in a Bloomberg poll.

The factory sector was stymied by electronics' year-ago high base and contraction in the volatile biomedical cluster, according to Economic Development Board (EDB) data on Friday (Feb 25).

Biomedical manufacturing shrank by 10.6 per cent year on year on lower output of biological products. Excluding biomedical manufacturing, overall factory production was up 4.7 per cent.

Output in the linchpin electronics cluster was almost flat at 0.1 per cent growth, against a decline of 2.6 per cent in the month before, as production in the key semiconductor segment contracted by 0.9 per cent. The EDB blamed "the high production base a year ago".

The chemicals cluster was down by 2.3 per cent, as lower output in fragrances offset the improvement in petroleum refining throughput, specialties, and petrochemicals.

That's even as the rest of the manufacturing clusters posted double-digit growth in January:

• General manufacturing (17.4 per cent)
• Transport engineering (16.2 per cent)
• Precision engineering (11.6 per cent)

On a seasonally-adjusted, monthly basis, industrial production fell by 10.7 per cent in January, or 0.2 per cent when biomedical manufacturing output was excluded.

Brian Tan, economist at Barclays, called the headline factory output disappointing, but noted that industrial production was otherwise broadly stable: "The drag stemmed primarily from plummeting biomedicals output - which could just as easily skyrocket upwards in the coming months."

JPMorgan economic and policy research analyst Ong Sin Beng added: "Through the month-to-month volatility in tech and biomedical output, production excluding biomedical and electronics tends to be a useful bellwether of broader capital spending and this indicator rose 0.5 per cent month on month, seasonally adjusted."