SINGAPORE’S manufacturing output gained 1 per cent on year in November, extending October’s surprise 7.6 per cent growth after a year-long slump.

The reading, however, underperformed against economists’ median expectations of a 2.2 per cent growth in a Bloomberg poll.

This came as the key electronics sector grew at a slower pace than in the preceding month, data from the Singapore Economic Development Board (EDB) showed on Tuesday (Dec 26).

Excluding the typically volatile biomedical cluster, factory output climbed 1.9 per cent, following the 7.4 per cent year-on-year increase in October.

These figures came as the majority of clusters recorded growth. Singapore’s purchasing managers’ index in November had also remained in positive territory, ticking up 0.1 point from the preceding month to 50.3.

In November, the lynchpin electronics cluster posted a weaker showing than in October, though it marked the highest growth among clusters. Electronics production grew 7.3 per cent year on year, down from the 15.1 per cent expansion the month before.

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Despite the step down in growth, Moody’s Analytics economist Denise Cheok still views the month’s electronics reading as a positive sign.

“The tech cycle had crashed a year ago, and the low base played a role in pushing up October’s readings,” she said.

The infocomm and consumer electronics segment marked the strongest growth at 13.9 per cent. Also up were semiconductors (8.2 per cent) and other electronic modules and components (2.4 per cent).

The continued growth in semiconductor output and consumer electronics is a marked improvement from the double-digit contractions earlier this year, said Cheok.

“While global semiconductor billings indicate that the tech downturn is firmly behind us, the recovery is expected to be a bumpy one, and it will take time before manufacturing and export numbers pick up significantly,” she added.

Output in the computer peripherals and data storage segment fell by 8.3 per cent. But UOB senior economist Alvin Liew and associate economist Jester Koh noted that this was narrower than October’s 15.3 per cent decline.

Other clusters posting increases in industrial production were transport engineering, which expanded 7.2 per cent, general manufacturing, which grew 3.2 per cent, and chemicals, which was up 2.7 per cent.

In transport engineering, the marine and offshore engineering segment recorded a double-digit jump in production (27.9 per cent), supported by a higher level of activity in shipyards and increased production in oil and gas field equipment. However, output in the aerospace and land segments both slid.

The reason for the unexpected 0.1 per cent contraction in the aerospace segment – which occurred despite perceived strong air travel demand globally – was omitted in EDB’s report, the UOB team noted.

Segment performances were also mixed for general manufacturing and chemicals.

The remaining clusters recorded falls:

• Biomedical manufacturing (minus 0.7 per cent)

• Precision engineering (minus 14.1 per cent)

Precision engineering was the main weight on November’s headline number, noted Cheok.

The machinery and system segment in particular was down due to lower production of semiconductor-related equipment, Cheok said. But she added: “This type of equipment, however, tends to lag behind the production of actual chips, and will therefore remain a beat behind the tech cycle.”

On a seasonally adjusted, monthly basis, manufacturing output fell 7.8 per cent in November. This was a “sharp sequential pullback” from October’s 9.9 per cent increase and September’s 13.4 per cent jump, concentrated in electronics and precision engineering, said Barclays senior regional economist Brian Tan.

He chalked this up to volatility, in the context of the gradual tech upcycle in the region. Monthly fluctuations aside, Tan also noted signs of electronics recovery.

Excluding biomedical manufacturing, factory output dropped 9.4 per cent, against October’s 4.5 per cent gain.

For the year to date, overall manufacturing contracted 4 per cent against the corresponding period last year, or 3.8 per cent, excluding biomedical manufacturing.

Manufacturing activity recovery will likely be driven by the electronics cycle upturn, but pockets of weakness in other key segments complicate the uptrend, said the UOB economists.

They believe that base effects could drive recovery in 2024, but sequential momentum “could remain fundamentally weak” in the first half of the year, with external demand weighed down by tight financial conditions due to the high interest rate environment in the US and European Union, as well as dampened consumer and business sentiment in China because of ongoing property sector woes.

Supply disruptions and delays could also occur in H1 due to geopolitical developments in the Red Sea, they added. The duo expect broader recovery towards the middle of 2024, when central banks in advanced economies – the US Federal Reserve in particular – may begin to cut rates as inflation nears their 2 per cent objective.

“In China, further policy support, including via interest rate cuts, may portend some uplift in external prospects,” Liew and Koh added.