Singapore’s factory output decline moderates to 2.1% as electronics production picks up
But economists are split on whether electronics output growth will be sustained
Elysia Tan
SINGAPORE’S manufacturing output slid 2.1 per cent on year (yoy) in September, easing from August’s 11.6 per cent decline as electronics output climbed, data from the Singapore Economic Development Board showed on Thursday (Oct 26).
The drop, which marked 12 straight months of declines, was smaller than the 4.5 per cent contraction forecast by private-sector economists in a Bloomberg poll.
Excluding the typically volatile biomedical cluster, factory output climbed 0.1 per cent, following the 12.7 per cent yoy fall in August.
These figures came as the majority of clusters recorded declines, though output in the key electronics sector rose. They are the latest in a more hopeful manufacturing outlook, with Singapore’s purchasing manager’s index in September creeping back into positive territory for the first time in six months.
But economists were mixed on whether electronics manufacturing will continue to perform.
Though not to the same extent as the biomedicals cluster, electronics output has been volatile in Q3, said Barclays senior regional economist Brian Tan, cautioning against reading too much into its swings.
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“With the jump in September, we now see the production roughly back to the trend level again,” he said.
Tan added that overall, momentum was relatively soft last month.
OCBC chief economist Selena Ling also noted that the last positive electronics print in July was “very brief” and was immediately followed a contraction in August.
But she added: “The latest September reading could potentially herald the turning point for the domestic electronics industry even if the recovery path from here remains somewhat bumpy.”
RHB acting group chief economist Barnabas Gan is positive on electronics in the next six to 12 months, and optimistic about precision engineering and transport engineering.
He noted evidence of a bottoming of global semiconductor demand. The Asean-6’s uptick in export momentum to the US and China will benefit Singapore’s small and open economy, he also said.
“The increased economic activities across Asean will likely support transport engineering activities amid the gradual recovery of tourism levels.”
China, meanwhile, has also shown very early signs of economic recovery, Gan added, citing stronger-than-expected Q3 gross domestic product (GDP) and higher momentum in its high-frequency numbers. This could mean further recovery in Asia’s trade and manufacturing, as well as more tourism from China to Asean, he said.
He said there is a material chance for Singapore’s manufacturing growth to turn positive year on year by year-end.
RHB maintained its full-year 2023 GDP growth forecast at 1.5 per cent, while Barclay’s forecast was unchanged at 0.5 per cent.
Indicating non-oil domestic export and GDP growth numbers, Gan added: “Recent incoming data is nothing but crystal-clear evidence pointing towards a rosier economic backdrop into 2024.”
For 2024, RHB kept its projection at 3 per cent, while Barclays maintained its projection at 1.3 per cent, “with modest upside risks”.
Cluster performance
In September, the linchpin electronics cluster posted a stronger showing. Output was up 10.2 per cent yoy, reversing from the 18.9 per cent contraction in the month before.
The infocomms and consumer electronics segment marked the strongest growth at 21.6 per cent. Also up were semiconductors (13.5 per cent) and other electronics modules and components (4.7 per cent), while computer peripherals and data storage declined 22.7 per cent.
Transport engineering reported a double-digit increase in output, gaining 13.2 per cent.
The marine and offshore engineering segment expanded 24.7 per cent, supported by a higher level of shipyard activity as well as increased production in oil and gas field equipment. The aerospace segment grew 14.8 per cent with higher demand for aircraft parts and more maintenance, repair as well as overhaul jobs from commercial airlines on the back of strong air travel demand globally.
Output in transport engineering’s land segment, however, fell 17.8 per cent.
All other clusters posted double-digit falls:
- Biomedical manufacturing (-18.9 per cent)
- Chemicals (-12.9 per cent)
- Precision engineering (-10.4 per cent)
- General manufacturing (-10.3 per cent)
All segments in chemicals, precision engineering and general manufacturing recorded declines.
The medical technology segment in the volatile biomedical manufacturing cluster expanded 9.3 per cent on strong export demand for medical devices. But output of the pharmaceuticals segment contracted 41.4 per cent on account of a different mix of active pharmaceutical ingredients produced, versus a year earlier.
On a seasonally adjusted, monthly basis, manufacturing output gained 10.7 per cent in September, reversing from the preceding month’s 10.8 per cent decline.
Excluding biomedical manufacturing, factory output grew by 17.9 per cent, reversing from August’s 16.7 per cent loss.
For the year to date, overall manufacturing dropped 5.8 per cent yoy, or 5.7 per cent excluding biomedical manufacturing.
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