Singapore’s factory output extends growth in February with 3.8% rise, beating estimates of 0.5%

SINGAPORE’S factory output grew 3.8 per cent on year in February, extending gains from January’s revised figure of 0.6 per cent growth, data from the Economic Development Board (EDB) showed on Tuesday (Mar 26).

February’s performance was better than expected by private-sector economists, who predicted a muted 0.5 per cent expansion in a Bloomberg poll.

Excluding the volatile biomedical manufacturing cluster, output grew by 1.4 per cent year on year in February, easing from the 4.7 per cent growth posted in January.

OCBC chief economist Selena Ling noted that February’s output data beat the bank’s forecast of 0.3 per cent year-on-year growth. This marks the second consecutive month of expansion, with the rebound in electronics and biomedical clusters forming bright spots, she said.

Factory output in the key electronics sector gained 2.6 per cent from the year-ago period, a reversal from January’s 4.7 per cent year-on-year decline.

Most segments grew for the month, with only the computer peripherals and data storage segment contracting 10.7 per cent. Infocommunications and consumer electronics recorded the largest jump at 30.9 per cent, followed by semiconductors (2.1 per cent) and other electronic modules and components (0.3 per cent).

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“Given the large weightage of electronics, especially semiconductors, whether the global demand outlook can sustain (growth) will be key,” said Ling. She predicted a year-on-year growth improvement of 2 per cent, minimally, for the full year of 2024, compared with 2023.

Moody’s Analytics economist Denise Cheok expects the electronics cluster to gain momentum in the second half of 2024, as global demand picks up.

Export data has gradually caught up with the recovery in industrial production, she noted, with non-oil domestic exports of integrated circuits rising year on year in February for the first time in 18 months.

Economists said that February’s growth was driven largely by the pharmaceutical segment under the biomedical manufacturing cluster, which surged 27.4 per cent. The pharmaceutical segment grew 73.2 per cent, as a result of increased production of biological products and a different mix of active pharmaceutical ingredients.

Other clusters that recorded rises were transport engineering (19.6 per cent) and chemicals (11.2 per cent).

Considering the downturn in 2023, UOB senior economist Alvin Liew and associate economist Jester Koh believe the year-on-year industrial production recovery in 2024 “will be partly driven by base effects”.

“(But) the sequential momentum could remain fundamentally weak in H1 2024, as external demand continues to be weighed down by tight financial conditions,” they said. This stems from factors such as an elevated interest-rate environment in the United States and the European Union, as well as dampened consumer and business sentiment in China from pressures on its property sector.

Yet, signs of a broader recovery in manufacturing could emerge towards the second half of the year, they said, as central banks in major advanced economies commence rate cuts.

Global financial conditions are expected to ease then, which “could stimulate investment and consumption activity in Singapore’s key export partners”.

The remaining clusters of general manufacturing and precision engineering both recorded falls in production in February. General manufacturing fell 3.4 per cent, while precision engineering had a sharper fall of 19.9 per cent.

In precision engineering, all segments recorded output declines. The precision modules and components segment contracted 15.1 per cent, led by lower output of metal precision components, optical instruments as well as dies, moulds, tools, jigs and fixtures. The machinery and systems segment declined 20.4 per cent, largely due to lower production of semiconductor-related equipment.

On a seasonally adjusted monthly basis, manufacturing output climbed 14.2 per cent in February, reversing from January’s revised 6.7 per cent contraction.

Excluding biomedical manufacturing, production edged up 10 per cent on the month, seasonally adjusted, reversing from the 7.8 per cent contraction recorded in the previous month.