Factory output sees biggest fall in over 2 years

MANUFACTURING output here suffered its biggest slump in more than two years last month, though a modest rebound in electronics was one bright spot. In the latest blow to the ailing sector, output tumbled 8.7 per cent in April from the same month last year, missing market forecasts by a wide margin.

Analysts polled by Bloomberg had expected a less severe 3.6 per cent contraction year on year.

Last month's slowdown follows two straight months of falling output, and is the sharpest drop since February 2013, according to data released yesterday by the Economic Development Board (EDB).

The biomedical cluster was the main drag on growth, nose-diving 28.6 per cent, as volatile pharmaceutical output fell 38 per cent owing to lower production of active pharmaceutical ingredients and biologics products.

Excluding biomedical manufacturing, which accounts for 18 per cent of total production, total industrial output fell 1.9 per cent. But the weakness was not limited to the biomedical cluster.

Of the six manufacturing clusters, only the electronics and chemicals clusters expanded last month. Dr Tan Khay Boon, senior lecturer at SIM Global Education, said last month's numbers reinforce the trend that manufacturing is the "weakest link" among all the sectors in Singapore.

While the electronics cluster - which accounts for a third of all factory activity here - grew 1.2 per cent from a year earlier, Dr Tan warned that unless there is "a large surge in external demand", this growth will be hard to sustain.

JP Morgan analyst Benjamin Shatil agreed: "The hope was that new tech product launches would provide some support to electronics production, but last week's trade data and production reports from other emerging market Asian exporters are sending no clear signal of a lift in the region." The other bright spot came from the chemicals cluster, which grew 3.9 per cent last month from a year ago.

And though the medical technology segment has only a small representation in the biomedical cluster, the EDB is upbeat about the segment, which posted a strong 28.1 per cent growth on "robust demand for medical devices and supplies".

Revised figures for the first quarter economic output were also released yesterday.

Manufacturing output shrank 2.7 per cent from the same period a year earlier, which was not as bad as the advance estimate of a 3.4 per cent contraction. "But this does not mean that the manufacturing sector is out of the doldrums yet," said UOB economist Francis Tan. marilee@sph.com.sg

ELECTRONICS GROWTH HARD TO SUSTAIN

The hope was that new tech product launches would provide some support to electronics production, but last week's trade data and production reports from other emerging market Asian exporters are sending no clear signal of a lift in the region.

- JP Morgan analyst Benjamin Shatil

This article was first published on May 27, 2015.
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