Singapore factory output growth cools to 2.2% in June amid electronics slowdown, chemicals decline
SINGAPORE’S factory production growth slowed to 2.2 per cent in June, down from 10.4 per cent in May, as the sector was dragged down by softer electronics output and declines in pharmaceuticals and chemicals.
The increase was well below the median forecast of 5.4 per cent in a Bloomberg poll of private analysts. Meanwhile, excluding the volatile biomedical manufacturing cluster, industrial production rose by 4.2 per cent year on year in June, according to preliminary data on Tuesday (Jul 26).
The linchpin electronics cluster cooled to growth of just 2.3 per cent year on year, against 22.9 per cent in May.
Output in Singapore’s key semiconductors segment shrank by 2.6 per cent, reversing the previous month’s expansion of 32.1 per cent. Meanwhile, the other electronic modules and components segment declined by 23.5 per cent, as the Economic Development Board (EDB) noted “lower export orders from China”.
Firm growth was still registered in other clusters:
Transport engineering (32.0 per cent)
General manufacturing (10.1 per cent)
Precision engineering (5.6 per cent)
But output fell year on year elsewhere:
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Biomedical manufacturing (-9.2 per cent)
Chemicals (-11.0 per cent)
The chemicals cluster’s petrochemicals segment posted lower production on plant maintenance shutdowns, while the other chemicals segment saw lower output of fragrances, EDB said.
On a seasonally adjusted, monthly basis, manufacturing output fell 8.5 per cent in June, or by 6.9 per cent when biomedical manufacturing was stripped out.
For the half-year to June 2022, Singapore’s manufacturing sector grew by 5.6 per cent year on year, or 7.5 per cent excluding biomedical manufacturing. The EDB noted that figures for the first 5 months “have been revised due to updated information about a firm-specific factor” in the semiconductor segment.
“Manufacturing growth lost steam in June as semiconductor production fell sharply from the record high level in May,” Maybank economists Chua Hak Bin and Lee Ju Ye wrote in a report, while noting that semiconductor output hit its lowest level in 13 months. “Slowing consumer demand for personal computers and smartphones may be weighing on chips.”
Nomura’s Euben Paracuelles and Charnon Boonnuch said the electronics sector would face greater headwinds into 2023, though they added: “The drags from the change in pharmaceutical product mix and the maintenance shutdowns at chemical plants should dissipate soon, resulting in a rebound in output.”
Analysts warned second-quarter gross domestic product growth will likely be downgraded from the official flash estimate of 4.8 per cent, as Brian Tan, economist at Barclays, said smaller manufacturing growth is “likely offsetting any potential upward revision in second-quarter services activity”.
Said OCBC chief economist Selena Ling: “I would expect Singapore’s manufacturing growth to hover in the low single-digit year-on-year growth range given the high base in the second half of 2022 and the global growth slowdown or recession concerns across major economies like United States, European Union and China.”
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