SINGAPORE (Mar 27): Singapore’s factory output fell 1.1% year-on-year in February, following a contraction in its linchpin electronics sector. This dip comes despite increases posted by other segments and comes after January’s surprise 3.4% increase.
Excluding the biomedical sector, output tanked 2.5%, according to data released on Mar 26 by the Singapore Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).
On a seasonally adjusted month-on-month basis, manufacturing output plunged 22.3% in February – a significant deviation from the 18.2% expansion seen the month before. Excluding biomedical manufacturing, February’s output was down 17.9%.
The latest data is the biggest contraction in Singapore’s factory output since 1983 and falls short of the 11.5% month-on-month dip forecast in a Reuters poll.
Specifically, the decline was heralded by a 17.3% contraction in electronics output. However, a sharper dip was prevented by a 14.9% increase in its electronic modules and components segment.
All the other segments logged expansions with precision engineering having the highest output growth of 26.2%. This follows a 29.4% expansion it the machinery and systems segment which comes from higher production of semiconductors and lifting and handling equipment.
The sector also benefitted from a 20.1% increase in the precision modules and components segment, following an increased production of optical products, dies and molds and metal precision components.
Meanwhile, general manufacturing output was up 16.1% due to increases in production of miscellaneous industries (+25.7%), printing (+17.5%) and food, beverage and tobacco (+9.3%).
Transport engineering also recorded an increase of 10.9%, on the back of a 17.9% expansion from its aerospace segment which benefitted from more repair and maintenance to commercial airlines. The sector also grew from a 5.6% increase in marine and offshore engineering projects.
Biomedical manufacturing was up 6.4%, following a 9.1% expansion to its medical technology segment from higher exports medical devices. A simultaneous 5.3% increase in pharmaceutical production also provided a lift.
The chemicals cluster followed suit with a 5.2% increase in output, due to increases in specialities (+11.5%), petrochemicals (+5.3%) and petroleum refining (+3.2%). The sector however was dragged by a 2% decline from the other chemicals segments.
Looking at the data, economists say the substantial decline in February’s output reflects the heightened impact of the Covid-19 outbreak which has halted production levels and disrupted global supply chains since end-January.
They caution that this is just the start of a steeper decline as the virus shreds more economies, causing a grounding of airlines, travel restrictions and lockdowns in some countries.
OCBC’s head of treasury research and strategy Selena Ling is thus looking at a 16% contraction in manufacturing this year. "Even without the US-China trade war, the Covid-19 pandemic is the black swan event that has... impacted global demand and dashed hopes of a manufacturing rebound," she added.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Yu agree, noting that “the first quarter advanced estimate for manufacturing at -0.5% implies that this month’s (March) industrial production contracted 4.3%, but we expect the decline to be more severe as the Covid-19 outbreak has intensified outside China”.
Their comments come after the MTI downgraded its official growth forecast for Singapore to between -4% and -1%. The move is just a month after the -0.5% - 1.5% target range predicted by the ministry.
