August manufacturing data a let-down

PHOTO: August manufacturing data a let-down

SINGAPORE - Singapore has turned in its second disappointing set of economic figures in just over a week.

At face value, the latest manufacturing figures look respectable.

Factory production grew 3.5 per cent last month over August last year, boosted by higher output from transport engineering and electronics firms.

But although the increase beat July's expansion of 3 per cent, it came in below economists' expectations of 4.9 per cent growth.

And in month-on-month terms, manufacturing shrank 1.4 per cent in August over July - its third straight month of decline.

Economists say August's manufacturing data, which came in weaker than expected despite a low base last year, is the latest in a series of disappointments.

The somewhat downbeat data might also be a drag on third-quarter economic growth numbers, they added.

The data, released yesterday by the Economic Development Board (EDB), follows an announcement last week of an unexpected 6.2 per cent drop in August's non-oil domestic exports (Nodx).

Gross domestic product (GDP) growth in the third quarter will continue to be services-driven, though there are signs of a weak manufacturing recovery, said Bank of America Merrill Lynch economist Chua Hak Bin.

Manufacturing output is expected to grow an average 2.7 per cent in the third quarter, he added.

The biomedical manufacturing segment was a slight drag on August's factory output.

Output for biomedical manufacturing - the No. 2 manufacturing cluster - fell 1.9 per cent last month year-on-year. Excluding biomedical, manufacturing would have grown a larger 4.8 per cent.

The general manufacturing and precision engineering clusters also registered declines in production.

Last month's manufacturing output was boosted by a stronger performance in some segments.

Production in the transport engineering segment, which includes marine and offshore engineering as well as land and aerospace transport engineering, surged 18.1 per cent year on year.

Electronics output, which accounts for the largest share of the manufacturing sector, grew 5.3 per cent.

Chemicals production rose by 4.9 per cent over last year, the EDB data showed.

"This indicates Singapore still has comparative advantages in some segments of manufacturing," said Barclays economist Joey Chew.

Credit Suisse economist Michael Wan said a bigger pick-up in industrial production and growth momentum is expected next year.

"Growth in the US is expected to accelerate next year due in part to less acute fiscal tightening... while Europe is expected to continue its move out of recession into recovery," he said.

chiaym@sph.com.sg


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