Singapore June factory output down 6.9%, less than expected

Singapore

SINGAPORE'S industrial output fell 6.9 per cent in June, deepening from May's 2 per cent fall and marking the fourth straight month of year-on-year decline, according to preliminary estimates from the Singapore Economic Development Board on Friday.

This was a smaller decline than economists' expectations of an 8.5 per cent fall. Excluding the volatile biomedical manufacturing sector, however, output fell 9.9 per cent.

Biomedical manufacturing also cushioned month-on-month numbers. On a seasonally adjusted monthly basis, overall manufacturing output rose 1.2 per cent in June compared to May. Excluding biomedical manufacturing, it fell 2.9 per cent.

June's weak industrial production data "adds to a growing body of evidence" for the view that the Monetary Authority of Singapore will likely ease policy in October, said Barclays economist Brian Tan. He expects the official growth forecast range to be lowered in August, possibly to around 1 to 2 per cent, down from the current 1.5 to 2.5 per cent.

With June's figures, manufacturing fell 3.1 per cent in the second quarter, better than advance estimates of a 3.8 per cent fall, noted Maybank economists Chua Hak Bin and Lee Ju Ye.

But services growth could be revised down as trade-oriented sectors likely worsened in June, they add. They expect a small upgrade for second-quarter gross domestic product growth to 0.2 per cent, up from the flash figure of 0.1 per cent.

The troubled electronics sector, once the driver of manufacturing growth, continued to be the worst performer with output plunging 18.8 per cent in June, in the fourth straight month of decline.

All segments except for data storage saw lower production. In the first half of the year, electronics output was down 6.9 per cent from the year-ago period.

JP Morgan analyst Ong Sin Beng characterised the figures as otherwise "broadly stable": "Outside of tech and biomedical output, the overall production index has been stabilising, with a solid rise in precision engineering output."

General manufacturing and biomedical manufacturing performed the best; they were the only clusters with positive cumulative output growth for the first half of the year.

General manufacturing output rose 10.8 per cent in June, led by 22.2 per cent growth in the food, beverages and tobacco segment.

Miscellaneous industries grew 0.9 per cent, while printing shrank fell 14.8 per cent. On a year-to-date basis, general manufacturing output was up 4.3 per cent from the year-ago period.

Biomedical manufacturing output was up 5 per cent in June, with pharmaceuticals output up 5.3 per cent and medical technology output up 4.2 per cent. For the first half of the year, biomedical manufacturing output was up 9.6 per cent.

Precision engineering saw output rebound slightly after seven months of decline, inching up 0.3 per cent in June. The machinery and systems segment grew 3.3 per cent.

But on a year-to-date basis, precision engineering was still down 8.3 per cent. Chemicals output fell 3.3 per cent in June, dragged down by a 12.3 per cent fall in petrochemicals due to maintenance shutdowns in some plants. The remaining segments saw growth of between 0.4 per cent and 3 per cent. Chemicals output growth for the first six months of the year was almost flat at 0.1 per cent.

Transport engineering output fell 14.2 per cent, pulled down by a 33.3 per cent fall in marine and offshore engineering.

In contrast, land transport grew 15.3 per cent and aerospace, 7.3 per cent. For the first six months, the transport engineering cluster shrank 0.6 per cent.