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Singapore manufacturing powers ahead in first half year but faces hazy outlook
SINGAPORE – The rallying manufacturing sector became the strongest driver of economic growth in the first half of this year but the outlook for the next six months looks less certain.
Manufacturing, which makes up a fifth of the economy, expanded for the 10th straight month in May on the back of a global export rebound that has lifted demand for Singapore’s shipments, particularly in electronics.
But there are signs that this pick-up might be tapering off – May’s expansion was not only slower than in April, but also fell short of economist forecasts.
Output grew 5 per cent in May over the same month last year – down on the 6.7 per cent year-on-year rise in April and below the 7.5 per cent anticipated by private-sector economists in a Bloomberg poll.
Manufacturers told The Straits Times that performance across the sector has been patchy. Growth in the semiconductor and precision engineering segments is expected to hold steady, but the oil and gas industry continues to be a drag, with prospects uncertain.
Strong global demand for semiconductors has been giving firms cause for cheer since the final quarter of last year (2016).
Applied Total Control Treatment founder and managing director Marcus Sia said the company has recorded a 30 per cent rise in semiconductor and aerospace orders in the first six months of this year (2017) compared with the same period last year.
His company provides metal finishing services to a variety of industries.
He expects to see “strong and healthy” growth, especially in these two areas, in the next six months.
When it comes to the beleaguered oil and gas market, however, Mr Sia said that orders have gained slightly – but global political instability means that there is “no clear visibility” as to how it will do.
Mr Tan Ka Huat, managing director of industrial equipment manufacturer CEI, noted that segments such as aviation and semiconductors “look decent”, but oil and gas “still languishes with no end in sight”.
The gloomy outlook is also shared by Mr Lim Yu Jey, general manager of Lintech Engineering, which deals with customers in the energy sector: “Everybody is lacking sales options. We’re not getting sales – and there’s nothing much we can do.”
Beyond improving productivity – through ramping up automation, for example – the only option is to ride out the storm, he said.
CEI’s Mr Tan said his company was relying on a diversified customer base to compensate for the weakness in oil and gas.
“It’s quite stable for CEI because we have positioned quite well over the years, adding growing markets that aren’t boom and bust but are growing at 5 per cent to 10 per cent, like medical technology,” he added.
Mr Johnny Mok, general manager of electronic manufacturing services provider Add-Plus, tole The Straits Times: “The beginning of this year was quite good, but from this month onwards, we can see it’s slowing.”
Add-Plus focuses on products that are still in the research and development stage rather than those that have hit the mass market so it might take a while to feel the impact.
“We still have orders, there is demand,” added Mr Mok.
Aldon Technologies, which serves wafer fabrication clients and electronics makers, recorded expansion in the first half of this year, but managing director Allen Ang said this was likely linked to a raft of new orders that carried over from last year.
“The first half of 2016 was so-so – the second half actually picked up,” he said. “The momentum carried into the first half of this year, mainly because of the orders received last year.”
But that boost may be wearing off: “We are seeing a 10 per cent to 15 per cent drop in our revenue in the next six months, compared with the first half of 2017. Compared with the second half of 2016, it’s a drop of a few per cent.”
Apart from worries over whether global demand will hold up, some manufacturers are also concerned about fluctuations in the United States dollar.
“What is no good to me is the US dollar, because all my sales are in US dollars,” said Mr Tan of CEI, who branded the greenback a “wild card”.
Source: http://www.straitstimes.com/business/economy/singapore-manufacturing-powers-ahead-in-first-half-year-but-faces-hazy-outlook