Singapore March factory output eases to 3.4% amid steep fall in biomedical manufacturing

SINGAPORE'S factory output eased to 3.4 per cent year on year in March, as the steep fall in biomedical manufacturing could not offset the aerospace segment's production surge, according to data from the Singapore Economic Development Board (EDB) on Tuesday (Apr 26).

Excluding the typically volatile biomedical manufacturing sector, industrial production (IP) for the same period grew 9.7 per cent year on year.

In February, overall manufacturing jumped a revised 17.5 per cent year on year, helped by a surge in biomedical manufacturing.

On a seasonally adjusted month-on-month basis however, manufacturing output fell 12.6 per cent, while the figure is 6.1 per cent excluding biomedical manufacturing.

Still, March's performance turned out to be better than expected, given that private-sector economists polled by Bloomberg had predicted growth of just 2 per cent.

"While the data appear to show a notable deterioration in March from February, we believe this was mainly due to a seeming lack of holiday-related downtime in February," said Barclays regional economist Brian Tan, noting that the Chinese New Year holiday, which was in early February, tends to weigh on manufacturing activity in the month it is held.

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He added that the seasonally adjusted IP levels in March generally remain above their January levels, suggesting that any disruption from the lockdowns in China and Russia-Ukraine war appear limited at the time.

The star performer in March is the transport engineering sector, which saw a 20.7 per cent year-on-year increase in output, compared with 5 per cent the previous month. The aerospace segment surged 39.3 per cent with higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines, EDB said.

Since the Covid-19 pandemic started in early 2020, aerospace output rose above its pre-pandemic level in the first quarter of 2019 for the first time by 3.2 per cent, said Nomura economists Euben Paracuelles and Charnon Boonnuch.

"We think this marks a restart of the segment and thus will provide additional support to overall IP growth in coming months," they said.

Electronics output grew 14.5 per cent year on year, easing from February's 32 per cent jump. EDB said the semiconductor segment grew 17.3 per cent supported by sustained demand from 5G markets and data centres amid the global chip shortage.

The other sectors that saw growth were:

• General manufacturing (10.2 per cent)
• Chemicals (0.8 per cent)

The biomedical sector was the biggest loser in March as output tumbled 26.3 per cent year on year, undoing the previous month's 26.1 per cent surge. The pharmaceuticals segment declined 39 per cent due to a different mix of active pharmaceutical ingredients being produced, according to EDB, while the medical technology segment contracted 7.1 per cent.

The precision engineering sector was the only other sector that contracted, with output dipping 1.4 per cent year on year, compared with a 1.1 per cent growth in February.

Overall, March numbers should bring Q1 manufacturing growth to 7.1 per cent, according to economist estimates, which is higher than the advance estimate of 6 per cent.

This also implies an upgrade to the final print for Q1's growth domestic product, which according to advance estimates was 3.4 per cent.

In the quarters ahead, manufacturing growth could ease to "single-digit pace", said Maybank economists Chua Hak Bin and Lee Ju Ye, "as chip production is operating near full capacity and on high base effects".

China’s lockdown, weaker growth in the European Union and rising energy prices are likely to dampen global manufacturing and trade, they added.