Singapore factory output grows 0.5% in August, beating economists’ estimates

SINGAPORE’S factory output expanded by 0.5 per cent on the year in August, down from a revised 0.8 per cent growth in July, according to data from the Singapore Economic Development Board (EDB) on Monday (Sep 26). The month’s figures outperformed median estimates of a Bloomberg poll of private-sector economists, who had expected a 0.7 per cent contraction.

However, excluding the volatile biomedical cluster, factory output shrank by 1.2 per cent, compared to a 3.1 per cent increase in the preceding month.

These figures came as declines were recorded in the key electronics cluster and chemicals cluster. They are the latest in a weakening manufacturing outlook, with Singapore’s purchasing managers’ index having fallen in August to the 50.0 border between expansion and contraction, similarly dragged down by electronics.

The linchpin electronics cluster recorded a 7.8 per cent contraction year on year, against a 5.9 per cent contraction in July. The cluster was dragged down by declines in all segments on the back of softening demand.

The other electronic modules and components segment shrank most significantly (-19.3 per cent), followed by infocomms and consumer electronics (-11.7 per cent), semiconductors (-6.6 per cent) and computer peripherals and data storage (-5.3 per cent).

Also seeing a contraction was the chemicals cluster (-11.2 per cent), reversing the 5.7 per cent growth in July.

The petroleum segment grew on account of higher demand for jet fuel driven by the relaxation of global air travel restrictions. Conversely, output of the specialties segment declined on lower production of mineral oil additives and industrial gases, while output of the other chemicals segment fell due to lower output of fragrances. Plant maintenance shutdowns also led to a contraction in the petrochemicals segment.

However, a majority of the clusters saw firm growth.

Output grew year-on-year for:

  • Transport engineering (32.8 per cent)
  • General manufacturing (18.8 per cent)
  • Biomedical manufacturing (11.1 per cent)
  • Precision engineering (2.9 per cent)

In August, biomedical manufacturing reversed from a decline in previous months, with the medical technology segment seeing expansion (18.9 per cent) from a year ago on the back of higher demand for medical devices from the US and China.

On a seasonally adjusted, monthly basis, manufacturing output reversed from the previous 2 months of contraction to grow 2 per cent in August. Barclays economist Brian Tan attributed the growth to a rebound in biomedical segment output, which surged 17.7 per cent on the month. Excluding biomedical manufacturing, factory output fell by 2.9 per cent.

Tan noted that electronics output also rose month on month in August, but the increase was not sufficient to offset the contraction in July, which had followed a drop in June.

“Production has been relatively choppy this year, and our estimates suggest seasonally adjusted levels of electronics output have sunk well below trend,” he said.

For the year to date, overall manufacturing grew by 4.4 per cent year on year, or 5.9 per cent excluding biomedical manufacturing.

Barclays maintains its 3.7 per cent gross domestic product (GDP) forecast for the year, in the upper half of the official 3 to 4 per cent forecast range.

“Taking the latest activity data into account, we estimate GDP growth is on track to moderate to 3.8 per cent year on year in Q3 from 4.4 per cent in Q2,” said Tan. “While manufacturing activity likely slowed in Q3, services activity continues to recover after the lifting of social distancing measures and international travel restrictions.”