Singapore’s factory output snapped out of a three-month losing streak with a 13.7% year-on-year expansion in August. This follows a strong growth in semiconductor production and demand for biomedical products.
Excluding the biomedical cluster, the increase in output widened to 15.3%, according to data released by Singapore’s Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).
August’s rebound comes as a surprise as July’s 8.4% plunge was noted as Singapore’s worst year-on-year performance on record since 1983. It is also a stronger performance than the 4.6% expansion forecast by economists in a Reuters poll.
On a seasonally adjusted month-on-month basis, manufacturing output surged by 13.9% - a significant improvement from the 1.6% growth registered in July. Excluding biomedical manufacturing, the growth in August’s output narrowed to 4.8%.
The biomedical cluster – a key driver of Singapore’s factory output this year despite the volatility it has been facing – posted an 8.4% year-on-year growth in output in August. This follows a 19.3% increase in the exports of medical technology equipment such as medical instruments.
A 5.7% increase in the output of biological products also provided a lift to the sector’s performance.
Precision engineering followed suit with a 9.4% increase in output amid a 17% increase in its machinery and systems segment due to higher production of semiconductor equipment.
Still, the cluster was burdened by a 4.3% dip in the output of optical products, dies, moulds, tools and jigs which are categorised under the precision modules and components segment.
Chemicals, similarly, saw output improve by 3.1% thanks to stronger demand for its specialties (+8.9%) and petrochemicals (+7.8%) segments.
However, a higher increase was prevented by declines to other chemicals segments (-8.8%) as well as the petroleum segment (-16.3%) which was affected by plant maintenance shutdowns and lower export orders due to the Covid-19 pandemic.
An interesting performance in August was seen in the linchpin electronics cluster’s 44.2% surge in output. This follows a 56.9% surge in output from its semiconductor segment due to demand from cloud services, data centres and the 5G market.
EDB notes that the cluster’s infocomms and consumer electronics and computer peripherals and data storage segments had conversely registered declines.
Meanwhile, general manufacturing and transport engineering remained in the red in August.
Output from transport engineering narrowed marginally to dip 36.0% due to dips in the aerospace and marine and offshore engineering segments by 24% and 50.7% respectively. This is a result of the travel restrictions imposed globally to curb the spread of Covid-19 infections.
General manufacturing likewise saw output plunge by 18.6% with all segments coming in the red. The strongest decline of 24.1% was seen in the miscellaneous industries segment due to lower output in construction-related products and a slower resumption of domestic construction activity.
Lower demand was also seen in printing orders which was down 21.8% as well as the food, beverage and tobacco segment which was down 13.8% following maintenance shutdowns.
The “very stellar performance” in Singapore’s factory output comes as manufacturing and electronics logged growth points that were the strongest since March 2020 and October 2017 respectively, says Selena Ling who heads the treasury research and strategy department of OCBC Bank.
“Our sense is that the uptick in the global electronics demand will likely sustain in the coming months as this improvement trend is apparent across other key regional manufacturing hubs including Taiwan and South Korea,” notes Ling.
She is thus looking at a full-year growth in manufacturing of 3.5% year-on-year, up from her previous prediction of a 2.5% growth.
Agreeing, JP Morgan economist Ong Sin Beng says that the manufacturing sector is turning up and is “expected to lead recovery”. He is looking at a strong 40% quarter-on-quarter expansion in factory output numbers on a seasonally adjusted basis in 3Q2020.
Thereafter he expects a “moderation in the pace of expansion in 4Q2020” due to the delays in the resumption of international travel and related services.
