Singapore factory output down 6.9% in April in 7th straight month of contraction

SINGAPORE’S factory output fell a surprising 6.9 per cent year on year in April, marking the seventh straight month of contraction as the electronics segment continued to be the main drag on growth, data from the Singapore Economic Development Board (EDB) showed on Friday (May 26).

April’s contraction was higher than March’s revised figure of a 3.8 per cent fall, and worse than the 4.5 per cent decline that private-sector economists polled by Bloomberg were expecting.

Excluding the biomedical cluster, which is typically volatile, factory output fell 6.1 per cent year on year in April.

The latest print affirms the downbeat manufacturing outlook due to the worsening electronics downcycle and weaker external demand, said UOB senior economist Alvin Liew, who maintained his forecast for Singapore’s manufacturing to contract by 5.4 per cent in 2023.

DBS Group Research economist Chua Han Teng, also noted that aside from the volatile biomedical cluster, the electronics cluster remained the main drag on growth and key weak spot in April.

He foresees that headline manufacturing output will record more consecutive negative year-on-year prints in the near term, with risks tilted to the downside.

Nevertheless, despite the worse-than-expected performance in April, some private-sector economists still believe that manufacturing momentum could pick up towards the second half of the year.

“Notwithstanding the disappointing manufacturing numbers seen in April, we noticed that the performance of advanced economies has been relatively resilient, thus translating into the return of global risk appetite and improving momentum in externally-related economic data across most of Asean,” wrote RHB senior economist Barnabas Gan in a report.

He maintained his 2023 full-year factory output growth forecast of between 0 and 2 per cent, with the balance of risks tilted to surprise on the downside.

DBS’ Chua identified two potential upsides to manufacturing growth. They are “a possible turnaround in the electronics cycle in the second half of 2023 as the ongoing inventory destocking process completes; and China’s ongoing post-pandemic growth recovery, which is uneven for now”, he said.

On a seasonally adjusted month-on-month basis, output shrank 1.9 per cent, reversing the previous month’s 9.7 per cent growth. Excluding biomedical manufacturing, factory output was up 2.2 per cent.

April’s manufacturing performance mirrors the weak showing of non-oil domestic exports, which has also contracted for seven straight months.

Cluster performance

Biomedical manufacturing was the worst-performing cluster in April, clocking an overall contraction of 11.1 per cent year on year, reversing from March’s 8.2 per cent expansion.

The pharmaceuticals segment was the main drag, with production sliding 14.1 per cent year on year due to a different mix of active pharmaceutical ingredients being produced compared to a year ago, said EDB.

Output from the lynchpin electronics cluster shrank 8.7 per cent year on year, extending the previous month’s decline. All segments declined in April, with computer peripherals and data storage recording the biggest fall of 33.5 per cent.

Within the electronics cluster, the semiconductor segment contracted for the sixth straight month, recording a 6.9 per cent decline. “The downward trend of Asia-Pacific semiconductor sales continued to worsen in March, which bodes further ill for semiconductor demand,” said UOB’s Liew.

Chemicals production contracted 6.2 per cent on the year, led mostly by the poor-performing petrochemicals segment, which fell by 8.4 per cent.

Other clusters which also declined in April were:

• Precision engineering (-8.2 per cent)
• General manufacturing industries (-7.6 per cent)

Transport engineering was the only bright spot in April, recording year-on-year growth of 14.5 per cent. This was led by gains in the marine and offshore engineering segment, which expanded 24.2 per cent, supported by a higher level of activities in shipyards, as well as increases in the production of oil and gas field equipment.