Singapore’s manufacturing output plunges 3.6% in July

Aug 26 Singapore’s industrial production in July unexpectedly shrank from a year earlier, as output falls in pharmaceuticals as well as marine and offshore engineering offset a rise in electronics, data showed on Friday.

The chemicals cluster saw a 3.2 per cent year on year fall in output, while that of the precision engineering and general manufacturing industries fell by 4.9 per cent and 10.2 per cent respectively. Their median forecast was for a 0.8 per cent year-on-year expansion; only seven analysts had expected a contractionary reading, with even the lowest estimate pencilling in a milder 1.5 per cent decline (Credit Suisse’s Michael Wan).

On a seasonally adjusted month on month basis, manufacturing output dropped 4 per cent in July – worse than the 1.1 per cent expected by economists.

The weak showing was due to broad-based contractions in all clusters save electronics, and prompted at least one bank (UOB) to more than halve its full-year industrial production growth forecast to one per cent.

Among the worst performers, the transport engineering sector’s output shrank 21.8 per cent, as the marine and offshore engineering segment contracted 33.4 per cent on the back of weak rig-building activities and demand for oilfield and gasfield equipment amid low oil prices.

“Given the tepid external demand conditions, we tip 3Q16 domestic manufacturing growth to contract by 1.7 percent yoy, reversing the short-lived +1.1 percent yoy growth blip seen in 2Q16”, said OCBC Economist Kelvin Ang in a report. Its output was up 16.2 per cent from a year ago, thanks to a 34 per cent jump in the semiconductor segment. July 2015 also provided a low base for comparison.

Among components, the electronics cluster registered an increase in output, while the remaining all clusters reported declining trend during the month.

For Citi economist Kit Wei Zheng, “the risks of growth undershooting the already downshifted official expectations may have increased”.

Transport engineering industry continues to drag Singapore’s industrial output.