SINGAPORE’S factory output fell 3.9 per cent year on year in June, reversing May’s revised 2.3 per cent growth, according to Economic Development Board (EDB) data on Friday (Jul 26).
June’s performance was worse than private sector forecasts, where economists predicted a median 0.1 contraction in a Bloomberg poll.
Excluding the volatile biomedical sector, output declined 1.6 per cent year on year in June, reversing from the 9.5 per cent growth in May.
Factory output in the key electronics sector slid 5.5 per cent from the year-ago period in June, reversing May’s 18.6 per cent year-on-year growth. This was despite all segments recording gains except semiconductors, which declined by 9.4 per cent.
Moody’s Analytics economist Denise Cheok said the electronics production in South-east Asia has lagged the recovery in North-east Asia “owing to its place in global value chains”.
Demand for high-end chips produced in South Korea and Taiwan has surged due to advances in artificial intelligence, she said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Cheok added: “The momentum has been slow to trickle into lower-end chips used in consumer electronics and cars produced in Singapore and other parts of the region.”
DBS economist Chua Han Teng said: “Singapore’s manufacturing performance was choppy in Q2 2024, but we remain hopeful for a gradual and fragile recovery in 2024.”
He attributed June’s weak reading to the sharp pullback in the electronics sector, adding that the cluster’s performance will be crucial to Singapore’s factory output recovery this year.
“External demand for electronics products remains resilient, as evidenced by the continuous gains in Singapore’s electronics purchasing managers’ index sub-indices, such as new orders, new export orders, and backlog orders, as (at) June 2024,” he said.
He expects Singapore’s electronics output to benefit from the global tech upcycle, underpinned by the replacement of smartphones and PCs, as well as the expanded use of artificial intelligence applications.
Biomedical manufacturing was the worst-performing cluster for the month. Output contracted 23.2 per cent year on year in June, although the decline slowed from May’s 43 per cent slide.
This was largely driven by the pharmaceuticals segment, which contracted 47.1 per cent on account of a different mix of active pharmaceutical ingredients being produced compared to a year ago. In contrast, the medical technology segment rose 11.4 per cent, supported by export demand for medical devices.
Precision engineering also declined 3.2 per cent year on year in June.
The machinery and systems segment contracted 4.4 per cent, led by lower production of back-end semiconductor equipment and process control equipment. Meanwhile, the precision modules and components segment decreased 0.8 per cent, due to lower output of dies, moulds, tools, jigs and fixtures.
Conversely, transport engineering remained a bright spot, with output rising 10.3 per cent year on year in June.
The marine and offshore engineering segment expanded by 19.5 per cent, supported by a higher level of activity in shipyards as well as increased production in oil and gas field equipment. The aerospace segment grew 12.4 per cent, spurred on by higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines.
However, Cheok expects growth in the sector to moderate in the second half of the year “as travel-related demand normalises to pre-pandemic levels”.
Production in the remaining clusters grew on the year:
On a seasonally adjusted, monthly basis, manufacturing output slid 3.8 per cent in June, reversing May’s revised 0.5 per cent expansion. Excluding biomedical manufacturing, production fell 6.4 per cent on the month, seasonally adjusted, reversing the 7.1 per cent growth recorded in the previous month.
