[SINGAPORE] Factory output grew 8 per cent on year in June, beating expectations and strengthening from May’s downward-revised growth figure of 3.6 per cent, data from the Economic Development Board showed on Friday (Jul 25).
In a Bloomberg poll, private-sector economists had expected a 7.1 per cent increase.
But economists said June’s strong performance was partly due to base effects, and were cautious about the outlook for the second half of the year.
Excluding the volatile biomedical manufacturing cluster, output was up 8.2 per cent year on year in June, improving from May’s revised growth of 4.8 per cent.
However, on a seasonally adjusted monthly basis, output was largely unchanged from May. Excluding biomedical manufacturing, output fell 0.8 per cent, in contrast to 2.4 per cent growth in the previous month.
A “rebound in the volatile biomedical segment” offset month-on-month declines elsewhere, noted Barclays economists Brian Tan and Liu Hongying.
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These declines support their view that export front-loading – ahead of US tariffs taking effect on Aug 1 – is beginning to fade, they added.
DBS senior economist Chua Han Teng noted that June’s growth was at the fastest pace since November 2024, but attributed this partly to base effects.
Earlier front-loading will be “followed by a payback through decelerating trade and industrial production” in the second half of 2025, he warned.
Performance by cluster
All clusters saw output rise year-on-year, except for general manufacturing.
The linchpin electronics cluster’s output grew 6.6 per cent, building on May’s 3.4 per cent gain.
Within this cluster, infocomms and consumer electronics grew the most, at 22.4 per cent. This was followed by semiconductors at 4.3 per cent.
Such growth more than offset contractions in computer peripherals and data storage (-14.6 per cent), as well as other electronic modules and components (-14.8 per cent).
The precision engineering cluster charted the greatest year-on-year rise, at 18.9 per cent.
Within this cluster, the machinery and systems segment expanded 19.3 per cent, led by higher production of semiconductor equipment and process control equipment.
Output in the biomedical manufacturing cluster rose 11.3 per cent, with a 38.8 per cent rise in pharmaceuticals due to a low year-ago base. This more than made up for a 2.5 per cent fall in medical technology output.
Transport engineering output rose 9.2 per cent, led by a 20.6 per cent growth in the aerospace segment. This was bolstered by higher production of aircraft parts and more jobs in maintenance, repair and overhaul from commercial airlines.
This more than made up for declines of 2.6 per cent in marine and offshore engineering and 11.7 per cent in the land segment.
The chemicals cluster grew by 1.1 per cent. The petrochemicals segment expanded 6.9 per cent, due in part to a low production base last year, with plant maintenance shutdowns.
Growth was also seen in the other chemicals segment (5 per cent) and petroleum (1.8 per cent). In contrast, the specialties segment declined 6.5 per cent, with lower production of industrial gases, biofuels and food additives.
The general manufacturing cluster was the only one in which output fell, by 11.6 per cent. Production rose 2.5 per cent in printing but fell in the other two segments.
The food, beverages and tobacco segment declined 12.7 per cent with lower production of beverage products and milk powder. The miscellaneous industries segment contracted 11.6 per cent, mainly due to lower output of structural metal components and products, as well as paper and paperboard containers and boxes.
Staying cautious
Despite June’s strong performance, economists were cautious about H2 due to concerns over US tariffs.
Said DBS’ Chua: “Singapore’s export-oriented factories remain vulnerable to high global trade frictions from US tariffs and ongoing trade policy uncertainty, which would dampen external demand.”
OCBC chief economist Selena Ling expects a year-on-year contraction in H2, assuming reciprocal tariffs are implemented on Aug 1 – as US President Donald Trump had said.
While Singapore may face the baseline 10 per cent rate, the bigger question is whether sector-specific tariffs will be slapped on semiconductors and pharmaceuticals, she said.
Such tariffs could deal a “bigger hit to domestic manufacturing growth”, she added. Collectively, both sectors account for about 46 per cent of Singapore’s manufacturing.
Maybank economists Chua Hak Bin and Brian Lee noted that Trump has threatened to raise the baseline rate to 15 per cent, which would raise the effective tariff on Singapore to 6.9 per cent – after accounting for exemptions – from 5.1 per cent before.
Still, they expect a slowdown in manufacturing growth in H2, rather than a contraction.
This is as the US tariff impact may be cushioned by broadening artificial intelligence demand; a smaller US inventory overhang; and the US-China tariff truce possibly being extended beyond Aug 12.
