Jun 27, 2014

    Factory output declines in May

    CONTRARY to expectations, Singapore's manufacturing sector slipped into contraction mode last month - for the first time since June last year.

    Factory output declined 2.5 per cent last month year-on-year, pulled down by drops in both the electronics and biomedical manufacturing clusters.

    Economists polled by Bloomberg before the Singapore Economic Development Board (EDB) released the numbers yesterday had been expecting industrial production to rise by 2.4 per cent.

    Excluding the volatile biomedical sector - which contracted 9.2 per cent last month - output would have fallen by 0.5 per cent.

    "Without pharma offsetting (the decline), we would likely see the electronics (sector) drag overall industrial production (down)," said Daniel Wilson, an economist for ANZ.

    The electronics cluster - which retains the largest weight of 33.4 per cent on the industrial production index - proved to be the biggest drag on manufacturing output.

    Electronics production fell 7.5 per cent year-on-year last month; the semiconductors, computer peripherals, and data storage segments fell 6.4 per cent, 11.8 per cent, and 29.2 per cent, respectively.

    Output of all other clusters rose, except general manufacturing industries.

    The chemical-sector output rose 8.6 per cent on a year-on-year basis, with growth led by the petrochemicals segment, which rose 14.6 per cent on the back of expanded capacity.

    The transport engineering cluster grew 5.6 per cent, while the precision engineering sector grew 0.2 per cent.

    The EDB said that after adjusting for seasonal factors, last month's industrial production contracted 5.7 per cent month-on-month. Excluding biomedical manufacturing, output would have increased by 0.4 per cent.

    The contraction was much larger than private-sector economists had forecast - they had been expecting industrial production to fall 0.6 per cent last month from April, on a seasonally adjusted basis.

    The disappointing output numbers come after Singapore's exports unexpectedly fell last month on weak shipments of electronics and pharmaceuticals to its key markets.

    "It (output) will eventually benefit (from a recovery in major economies)," said Francis Tan, an economist at United Overseas Bank. "I am not so sure how many months it would take."

    Last year, the manufacturing sector made up roughly 19 per cent of Singapore's economy.