April industrial production beats forecasts with 2.9% expansion
Reuters file photo
SINGAPORE – Manufacturing output rose at the fastest pace since August 2014 in a surprise expansion last month, boosted by the surge in pharmaceuticals and semi-conductors. Meanwhile, March’s production was revised upwards to growth from contraction, prompting analysts to say a short-term recovery could be in sight as the longer-term outlook remains cloudy.
Industrial production grew 2.9 per cent last month from April last year, showed data from the Economic Development Board (EDB) on Thursday (May 26), beating by a wide margin the 0.3 per cent fall forecast by economists in a Reuters poll. The EDB also revised March’s output to 0.1 per cent growth from the previously reported 0.5 per cent decline.
The manufacturing output surge in April came mainly from the biomedical and electronics clusters, which contribute to about one-fifth and one-third, respectively, of the total weight in the industrial production index. Excluding the lumpy biomedical cluster, Singapore’s manufacturing output fell 0.1 per cent last month.
“The two clusters that expanded at a double-digit pace were the biomedical manufacturing and electronics clusters. For electronics, we believe that the expansion seen in the output of semi-conductors will likely continue until the end of this year due to the recent strength observed in the US SEMI book-to-bill ratio, as well as the low base in 2015,” said UOB economist Francis Tan.
The measure is the ratio of orders received to orders delivered and billed, a widely-followed gauge in the American technology industry.
“Although most manufacturing clusters contracted over the past year, the biomedical manufacturing cluster contracted only two times out of the past 12 months. Even so, it is still hard to expect growth for that cluster to sustain. It is our view that the biomedical cluster still remains a volatile entity, as past data has shown it to be so,” he added.
With the slight growth in March output having gained strong momentum last month, analysts said second-quarter economic growth could enjoy a fillip, although they added that the sustainability of the improvement remains in question, as the manufacturing sector is still facing structural challenges amid lower investments.
On Wednesday, the Ministry of Trade and Industry’s final report for first quarter gross domestic product (GDP) showed that the manufacturing sector contracted 1 per cent year-on-year, for the sixth consecutive quarter of year-on-year decline.
“The better-than-expected April industrial production numbers may point to green shoots for Singapore’s manufacturers in the coming months and reverse the contractionary trend seen over the past 18 months,” said Mr Tan. “The figures could help in second-quarter GDP growth, and also possibly break the past few straight quarters of year-on-year contraction for the manufacturing sector.
“However, we must note that even though improvement is seen, the sector is still weak in general as growth is not broad-based and several clusters are still not doing well.”
Credit Suisse economist Michael Wan added: “The question is whether the uptick in manufacturing will be sustained. Part of the improvement just reflects the short-term stimulus that China is pushing through, and lead indicators show that it will roll over. Also, investments into the sector have also fallen.”
Last month, biomedical manufacturing output expanded 14.9 per cent, largely due to a 17.7 per cent jump in the pharmaceuticals segment.
The medical technology segment also saw an increase of 5.4 per cent due to the higher export demand for medical devices. The electronics cluster rose 10.9 per cent last month, led by a 24.2 per cent growth in semi-conductor output.
