SINGAPORE (June 26): Singapore’s factory output snapped out of the green with a 7.4% year-on-year contraction in May, following a broad-based contraction in almost all clusters. The dip comes despite a continued surge in biomedical manufacturing, which has been on an uptrend since the Covid-19 pandemic broke out.
Excluding the biomedical cluster, output plummeted 10.4%, according to data released by the Singapore Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).
Interestingly, the decline in May’s factory output bucked the 7.7% expansion tipped by analysts in a Bloomberg poll. However, the latest data marks the republic’s worst year-on-year performance on record since 1983. It also surpasses the 1.1% contraction registered in February, which had previously been named the biggest fall.
On a seasonally adjusted month-on-month basis, manufacturing output dipped 6.2% - a significant deviation from the 3.6% expansion registered in April. Excluding biomedical manufacturing, May’s output was down 16.5%.
The 5.9% expansion in biomedical manufacturing output lifted the metric’s performance in May. Albeit narrower than the growth registered previously, this follows 14.7% higher production of active pharmaceutical ingredients and biological products.
The cluster’s performance was however dampened by a 20.1% drop in its medical technology segment.
The decline in factory output was heralded by a 40.7% drop in transport engineering. This comes from a 30.1% decline in the aerospace segment, following the grounding of aircrafts due to restrictions in international travel.
The cluster was further weighed by a 55.1% fall in the marine & offshore engineering segment as work in the shipyards slowed down during the circuit breaker.
General manufacturing followed suit, widening its decline to 26.2% amid softer export demand and scaled down production. The dip was led by miscellaneous industries (-41.6%), printing (-38.2%) and food, beverage and tobacco (-14.3%).
Similarly, chemicals output plummeted to 13.5%, as all segments logged declines, the EDB pointed out. The petrochemicals and petroleum segments saw the biggest losses of 10.7% and 19.0% respectively, due to weak demand and plant maintenance shutdowns.
The specialities and other chemicals segments also suffered from the Covid-19 outbreak, recording contractions of 12.2% and 21.8% respectively.
Meanwhile, precision engineering reversed into the red, as output declined 5.3%. This comes on the back of a 23.0% fall in output of precision modules and components – which took a hit from disrupted operations locally and in key export markets.
A further drop in the cluster’s output was mitigated by a 2.8% growth in the machinery and systems segment. This was enabled by stronger production of semiconductor equipment.
With a 1.0% fall, the electronics cluster was the last to register a contraction in output. This is in spite of a 1.6% growth in the semiconductors segment which was supported by demand from cloud services and data centres and 5G markets.
Looking at May’s factory output, United Overseas Bank (UOB) economist Barnabas Gan expects production levels to remain weak in June to reflect the Circuit Breaker and Phase One restrictions. A lift is expected to come from the imposition of the Phase Two restriction which took effect on June 19.
He believes pharmaceutical production and exports will be a boon to Singapore’s manufacturing and trade.
“The production of pharmaceuticals has expanded for five straight months, and remains to be the best performing cluster year-to-date,” he notes.
“Singapore’s role in international efforts to combat COVID-19 will continue to support the city-state’s manufacturing and export environment.”
