Industrial output sputters for 5th straight month
A manufacturing and logistics facility in Singapore. TODAY file photo
SINGAPORE — The industrial hum in Singapore grew a little more silent in June as manufacturing output contracted for the fifth consecutive month, surprising economists, who now expect this latest data to add another chink to the Republic’s already-slowing economy.
Industrial output fell 4.4 per cent compared with a year ago, extending a 1.7 per cent contraction in May, data from the Economic Development Board showed today (July 24). The indicators were worse than the 0.4 per cent decline that economists from a Reuters poll had expected.
“Industrial production figures for June have just delivered another blow to the economy … If it were not for the improvement in the biomedical cluster, it could have been worse,” said DBS economist Irvin Seah.
Output last month fell in five out of six clusters — electronics, precision engineering, general manufacturing products, biomedical manufacturing, and transport engineering — leaving the chemicals cluster as the sole bright spot as it gained 4.2 per cent year-on-year.
“The bad performance in transport engineering, which saw output fall 17.5 per cent, was a large surprise,” said UOB economist Francis Tan, noting the double-digit declines in the marine and offshore engineering as well as aerospace segments.
The key electronics cluster, which carries the largest weight in the industrial production index, fell 2.1 per cent year-on-year, mainly because of lower output from semiconductors.
“The second consecutive month of weak United States SEMI book-to-bill ratio and the disappointment in China’s manufacturing Purchasing Managers Index may weigh on the prospects of the electronics cluster in the months ahead,” cautioned Mr Tan.
On a seasonally adjusted basis, Singapore’s manufacturing output fell 3.3 per cent on-month for June, reversing from a 2.5 per cent increase in May.
“We see another two months of decline in industrial output figures and a possible pickup only in the fourth quarter,” said Mr Tan.
Hit by a double whammy of weak external demand and a tight domestic labour market, Singapore’s economy expanded 1.7 per cent in the second quarter from the corresponding period last year, slowing sharply from the 2.8 per cent growth in the first quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed last week.
The dismal performance of the manufacturing sector, which accounts for about a fifth of the economy, continued to be the biggest drag on growth. The sector contracted 4 per cent in the second quarter year-on-year, deepening from the 2.7 per cent decline in the first quarter, mostly because of a fall in output in the biomedical manufacturing as well as transport engineering clusters, and as demand from China remains sluggish.
Taking last month’s industrial production figures into account, economists are projecting a bleaker economic view.
“Overall manufacturing growth in the second quarter now reads -4.9 per cent, against the advance estimate of -4 per cent.
“This will essentially drag second-quarter GDP growth down by about 0.2 to 0.25 percentage points from the official projection of 1.7 per cent year-on-year,” Mr Seah said.
“For the full year, manufacturing could be the lame duck that tips the risk balance for Singapore’s full-year GDP growth to 2.2 per cent year-on-year,” said Ms Selena Ling, head of treasury research and strategy at OCBC Bank.
