Economists have been subject to one unpleasant shock after another in recent weeks, and the latest manufacturing data only worsened the already-gloomy outlook.
Output shrank for a fifth straight month in June, performing significantly worse than official and private-sector forecasters had tipped.
Some economists referred to the data as "ugly" and "utterly poor", warning that this means the economy as a whole likely grew even more slowly in the second quarter than previously estimated.
The latest factory data, which showed output sliding 4.4 per cent last month, came in way below the 0.4 per cent decline tipped by economists. It also came on the back of announcements that the official growth forecast for the year is being reviewed due to a weak first half. There were broad declines across almost all factory clusters last month, though the transport engineering segment saw the biggest plunge.
Output in the segment fell 17.5 per cent compared with June last year due to lower levels of rig building, and shipbuilding and conversion activities, as well as weak demand for plane engine repair jobs. The precision engineering, electronics, general manufacturing and biomedical manufacturing clusters also weakened, compared with June last year.
Bank of America Merrill Lynch economist Chua Hak Bin said the "ugly manufacturing reading" suggests second-quarter economic growth will likely be downgraded from an earlier official estimate of 1.7 per cent, which was "already weak and below expectations". He added that the Ministry of Trade and Industry is also likely to narrow its growth forecast for the full year to 1.5 to 2.5 per cent, from the current 2 to 4 per cent, given the challenging global outlook.
OCBC economist Selena Ling warned that the manufacturing sector, which makes up a fifth of Singapore's economy, is at risk of shrinking this year. The industry had already declined 3.7 per cent in the first six months of this year. If the volatile biomedical cluster is excluded, output fell an even steeper 5.3 per cent, Ms Ling noted. This pales in comparison to the same period last year, when manufacturing output grew 5.3 per cent, or 4.1 per cent excluding biomedical output.
Still, others have sounded a slightly more optimistic note.
DBS economist Irvin Seah, who described June's manufacturing data as an "utterly poor outcome", said the service segment might have picked up some of the slack.
"Service-sector growth figures tend to get underestimated in every preliminary estimate...Expect this figure to be revised upward, thereby providing some comfort to an otherwise-dreary economic performance in the quarter," he said.
Barclays economist Leong Wai Ho is hopeful that electronics firms will do better in this half. This is "consistent with the stronger external environment", supported by continued strength in the US and Europe, and a rise in Purchasing Managers' Index to a five-month high last month.
This article was first published on July 25, 2015.
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