Singapore's industrial output up a surprise 4.3% in October

The Business Times by JANICE HENG


SINGAPORE'S manufacturing output grew 4.3 per cent year on year in October, more than rebounding from September's marginal 0.1 per cent fall, according to preliminary estimates from the Economic Development Board on Monday. Excluding the volatile biomedical manufacturing sector, output grew 3 per cent.

Still, economists remain cautious on the manufacturing outlook, despite October's figure exceeding their expectations of 2.6 per cent growth.

On a seasonally adjusted month-on-month basis, October's industrial production also ended a three-month streak of decline by growing 2 per cent, or 3.9 per cent excluding biomedical manufacturing.

But Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said: "We think the rebound is short-lived and does not represent a turn in the manufacturing down-cycle." They noted that in Asia and Europe, purchasing managers' index figures - a leading indicator of economic activity - have been falling as the global tech cycle fades and the United States-China trade war disrupts supply chains.

UOB senior economist Alvin Liew also expects a slowdown in manufacturing for the remaining months of 2018, with a high base effect in electronics taking a larger toll and worsening trade tensions.

Singapore's electronics output fell for the second straight month in October, down 2.7 per cent year on year - a sign of the electronics down-cycle becoming more apparent, said the Maybank economists. Within the cluster, output fell for semiconductors, computer peripherals, and data storage. Other electronic modules and components grew 5.1 per cent, and infocomms and consumer electronics grew 1.7 per cent.

Despite this, electronics output has seen a cumulative increase of 8.9 per cent from January to October, compared to the year-ago period.

The only other cluster to see a contraction in output was chemicals, down one per cent year on year. Production in petroleum and petrochemicals fell 9.6 per cent and 14.7 per cent respectively due to maintenance shutdowns, while the other chemical segment grew 15.1 per cent with higher output in fragrances.

Transport engineering remained the top-performing cluster for the second straight month, with output up 30.8 per cent year on year and all segments recording growth. Marine and offshore engineering grew 52.2 per cent on the back of a low year-ago base, as well as more work done in offshore projects. Aerospace grew 15.6 per cent with more engine repair and maintenance work from commercial airlines.

Biomedical manufacturing output grew 11.5 per cent in October, in contrast to September's 9.3 per cent contraction. Pharmaceuticals output expanded 15.8 per cent, while the medical technology segment grew 2.9 per cent to meet US export demand.

Precision engineering output grew 1.4 per cent, with the precision modules and components segment's growth of 7.7 per cent more than making up for a 2.9 per cent fall in machinery and systems, due to lower production of industrial process control and semiconductor equipment.

General manufacturing ended a three-month decline by growing 1.3 per cent. Although the printing segment remained in contraction, the miscellaneous industries segment grew 2.9 per cent with higher production in structural metal products and batteries, while the food, beverages and tobacco segment rose 2.1 per cent with higher output in infant milk and dairy products.

With overall manufacturing output having grown 7.5 per cent year on year for the first 10 months of 2018, Mr Liew expects a slowdown in the final months for a forecast full-year manufacturing growth of 7 per cent.

OCBC economist Selena Ling thinks manufacturing activity "may moderate slightly towards the year-end" but without a significant drop-off in momentum. Citing the official GDP forecast's recent narrowing to 3 to 3.5 per cent for 2018 - on the high side of the earlier range - she sees fourth quarter growth as unlikely to undershoot 2 per cent year-on-year. She predicts 3.3 per cent GDP growth in 2018 and 2 to 3 per cent in 2019.

Mr Liew expects industrial production to moderate further next year but keep growing, at 3 per cent. His GDP forecast is 3.4 per cent for 2018 and 2.5 per cent for 2019.

Maybank's Dr Chua and Ms Lee are less optimistic, seeing "some risk" that industrial production may contract for a few months in 2019. Their GDP forecast was recently revised down to 3.2 per cent for 2018, with a 2.2 per cent prediction for 2019.