Singapore’s manufacturing output expanded for the fifth consecutive month in March, with a 7.6% y-o-y growth thanks to the electronics boom.
The latest showing is a slowdown from February’s 16.5% surge, but is still stronger than the 4.7% growth rate estimated by private-sector economists in a Bloomberg poll.
Excluding contributions from biomedical manufacturing, the expansion in manufacturing output widened to 14.9% y-o-y, according to data released by Singapore’s Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).
This comes as output from the biomedical cluster – which has been rather volatile in the past year – slipped by 6.6% y-o-y in March. This is a reversal from February’s 22.1% gain and follows a 9.6% reduction in the output of biological products.
A poorer performance by the cluster was mitigated by a 23.2% increase in its medical technology segment due to higher export demand for medical devices.
A key contributor to March’s manufacturing output was the linchpin electronics cluster, which surged by 33.7%. Semiconductors led this with its 37.8% growth which came in response to demand from cloud services, data centers and 5G markets.
Computer peripherals & data storage similarly grew by 27.4% in March. The collective growth of these two segments cushioned the impact of the production declines in other segments in the electronics cluster.
In the same regard, output from chemicals was up by 9.5% in March, with a substantial push coming from petrochemicals (+21.7%) and specialties (+10.9%).
The former had grown from the low base in 2020 while the latter benefitted from higher production of mineral oil additives.
These helped to minimise the effect of the declines in the output of other chemicals (-9.9%) and petroleum (-17.0%).
Output from the precision engineering cluster was also up by 5.6% in March. EDB attributes this to an 8.3% growth in its machinery & systems segment that had benefitted from higher production of semiconductor equipment amid the strong capital investment in the global semiconductor industry.
A further boost to the cluster came from a 5.7% rise in the precision modules & components segment following higher production of optical instrument and metal precision components.
The general manufacturing segment too, printed an expansion of 0.5% in March following a 10.0% jump in its miscellaneous industries segment due to higher production of wearing apparel and batteries. This helped to offset the declines in the output of food, beverage and tobacco (-5.7%) and printing (-9.6%).
Meanwhile, transport engineering contracted by 20.6% in March, making this the cluster’s 12th month in the red.
This was led by declines to the marine and offshore engineering (-20.9%) and aerospace (-26.8%) segments as the order intake took a hit from the weak global oil and gas market as well as the travel restrictions imposed to curb the spread of coronavirus infections.
A further contraction in the cluster was mitigated by a 14.1% growth to its land segment that benefitted from higher output of parts and accessories for motor vehicles.
Overall, on a seasonally adjusted m-o-m basis, Singapore’s industrial production dipped by 1.7% in March, or 3.2% excluding biomedical manufacturing.
The latest data takes Singapore's manufacturing performance to 10.7% growth in the first three months of 2021.
“The manufacturing sector (21.5% of GDP in 2020) has been a key growth driver, as services and construction recover more slowly. Port congestion and component shortages have not dampened the manufacturing and export recovery so far,” note Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye.
The higher-than-expected growth in March’s industrial production will likely lift Singapore’s GDP growth in the first quarter of 2021 to 0.9%, the duo say.
See: Singapore's GDP reverses from contraction to grow 0.2% y-o-y in 1Q21
The official estimates assumed that the manufacturing sector will grow by 7.5% y-o-y in 1Q21.
“Given that industrial production rose by a faster-than-expected rate of 10.7% y-o-y in the first three months of 2021, Singapore’s GDP should expand by 0.9% y-o-y in 1Q21, up from MTI’s advance estimates at 0.2% y-o-y assuming no major revisions to the services and construction sectors,” reckons UOB economist Barnabas Gan.
Agreeing OCBC economist Selena Ling expects the manufacturing sector’s double-digit growth to continue “given the low base a year ago with the start of the Circuit Breaker period and global lockdowns”.
Green shoots in major economies such as the US and China as well as the ramp up in vaccination both in Singapore and abroad will also help drive activity in the manufacturing sector, says Ling.
Aside from this, the establishment of travel bubbles such as between Singapore and Hong Kong bodes well for de well for the beleaguered tourism and air transport sectors, she adds.
See: Singapore travel bubble with Hong Kong to start May 26
Gan estimates the electronic and precision engineering clusters to perform well this year, on the back of global semiconductor-related demand and the increase in digital solutions adoption (5G technology, cloud computing etc) around the world.
“We are also positive on the chemicals cluster on the back of higher global oil prices,” says Gan, adding his forecast for Brent Crude to average US$70 per barrel in 4Q2021. For comparison, Brent Crude was at US$58.2 per barrel in 4Q2020.
