No thanks to a drop in the electronics sector, Singapore's manufacturing output for May dropped by 10.8% y-o-y - the eights straight month of decline. On a seasonally adjusted month-on-month basic, output was down 3.9% - signalling how the slide in this key economic activity, which is heavily reliant on external demand, is still on a downtrend and has yet to bottom.
"We reiterate our view that there is a substantial risk for Singapore to enter a technical recession in 1H 2023, largely driven by the weakness in manufacturing," says UOB's senior economist Alvin Liew, who expects full year manufacturing output to drop by 5.4% over 2022.
Excluding, biomedical manufacturing, which tends to be a more volatile segment and one that is relatively insulated from broader trends affecting other segments, output fell 13%.
Electronics output continued to suffer from lower external demand, down 23% y-o-y. While the Infocomm & consumer electronics segment grew 22.7%, others such as electronic modules & components, computer peripherals & data storage and semiconductors segments declined 9.2%, 26.6% and 26.8%.
Precision engineering, quite closely linked to electronics, was down 10.5%.
Transport engineering, which includes the aerospace segment, was up 28.4% overall. The marine and offshore engineering segment did better, was up 31.5%, not too far behind the 35.9% growth recorded by their aerospace counterparts.
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Biomedical manufacturing was up 4.4%; general manufacturing edge down by just 0.3%; chemicals out down by 9.5% and within which, the petrochemicals and petroleum segments declined by 11.2% and 15.7% respectively due in part to plant maintenance shutdowns.
Despite the bigger-than-expected drop for the May output numbers, Nomura economists Euben Paracuelles and Charnon Boonnuch are keeping their forecast that 2023 GDP will end at 1.1%, which is below the midpoint of the official estimate of between 0.5% and 2.5%. The consensus number is 1.4%.
"This reflects our view of still-weak external demand, led by a recession in the US that our US teams expect to start in Q3.
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"We also believe the services-producing sectors will likely follow the downturn in manufacturing, as they have in the past, making the overall economic slowdown more synchronized," they warn.
OCBC's Selena Ling shares a similarly cloudy view. "Market concerns about the sustainability of China’s re-opening pace have risen, and the palpable disappointment with the baby steps taken with its recent policy stimulus measures is also weighing on market sentiments."
"So dark clouds continue to loom for the global and domestic manufacturing sector may persist for the next few months," says Ling.
