Fall in Singapore’s factory output slows in July, down 0.9%
SINGAPORE’S factory output fell 0.9 per cent year on year in July, contracting at a slower rate than in the month before, as the key electronics segment returned to growth, data from the Singapore Economic Development Board showed on Friday (Aug 25). Excluding the biomedical cluster, which is typically volatile, factory output grew 1.7 per cent year on year in July.
July’s output data marked 10 consecutive months of contraction, but it was still lower than June’s revised figure of a 6.6 per cent decline, and better than the 3.8 per cent contraction that private-sector economists polled by Bloomberg were expecting.
The better-than-expected print signals that a gradual recovery in manufacturing activity is on the cards in the second half of the year, said DBS economist Chua Han Teng.
It also suggests that the slowdown in Singapore’s growth momentum will hit a trough in the second quarter of 2023, said RHB senior economist Barnabas Gan, who kept to his full-year industrial production growth forecast of 0 per cent.
“However, recovery will be fragile, given that the global economic environment remains challenging,” said DBS’ Chua.
While global semiconductor sales are turning around, and there is medium-term optimism on artificial intelligence-related chips, lingering geopolitical tensions could still disrupt supply chains.
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A sharp China slowdown is another risk, said Maybank economists Chua Hak Bin and Brian Lee, “but we are comforted by positive growth in China’s overall import demand in real terms in July, even though there was a contraction in value terms”.
They added: “China will likely relax some housing and credit measures, and unveil some modest fiscal policies to support domestic demand.”
On a seasonally adjusted month-on-month basis, manufacturing output increased by 4.1 per cent, extending the previous month’s 3.3 per cent growth. Excluding biomedical manufacturing, factory output was up 6.9 per cent month on month. July’s manufacturing performance continues to mirror the weak showing of non-oil domestic exports, which has been contracting for 10 straight months.
Cluster performance
Output from the linchpin electronics cluster rose 5.1 per cent year on year in July, reversing from the 2.9 per cent contraction recorded in the previous month. This was the strongest expansion by the cluster since May 2022.
Gains from the semiconductors, as well as infocomms and consumer electronics segments, offset declines in computer peripherals and data storage.
Electronics output may continue to register positive growth in the coming months as base effects turn more favourable and global electronics demand stabilises, noted Maybank’s Dr Chua and Lee. The United States manufacturing investment and construction boom will likely increase import demand, which may help shore up Singapore’s and Asian exports, they added.
Biomedical manufacturing was the worst-performing cluster in July, clocking an overall contraction of 22.6 per cent year on year, extending June’s 14.9 per cent decline.
Other clusters which also recorded declines in July were:
- Precision engineering (-7.6 per cent).
- General manufacturing industries (-8.5 per cent).
Transport engineering continued its good performance in July, growing 20.7 per cent year on year – extending the previous month’s double-digit expansion.
As global air traffic recovers, growth continued to be led by the aerospace segment. Its 26.9 per cent increase was due to higher demand for aircraft parts, as well as for maintenance, repair and overhaul services from commercial airlines.
Output for the chemicals cluster rose 2.3 per cent year on year in July, reversing from the previous month’s 8.9 per cent decline. Double-digit gains in the specialties segment offset declines in petrochemicals and petroleum.
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