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Biomedical sector helps manufacturing sector to 10th month of growth

SINGAPORE — Manufacturing output in the Republic expanded for the 10th straight month in April, helped by a robust biomedical sector that offset weakness in the electronics cluster, with economists saying a positive global outlook is likely to continue driving factory production here.

SINGAPORE — Manufacturing output in the Republic expanded for the 10th straight month in April, helped by a robust biomedical sector that offset weakness in the electronics cluster, with economists saying a positive global outlook is likely to continue driving factory production here.

Manufacturers produced 4.6 per cent more output last month compared with the same period a year ago, figures released yesterday by the Economic Development Board (EDB) showed. This was slower than the 12.1 per cent registered in March and below the 6.5 per cent forecast by economists in a Reuters poll. On a month-on-month, seasonally-adjusted basis, output fell 4.7 per cent.

The electronics sector, which accounts for more than one-quarter of overall manufacturing output in Singapore, suffered an 8.8 per cent year-on-year fall in production last month, driven by a sharp 11 per cent decline in the semiconductor segment due to what the EDB called a “firm-specific factor”.

The board was unable to reveal further details on the reason behind the fall, but said that it was a “one-off drop, attributed to a single company and for reasons specific to the company”. It declined to name the company and said the decline would be registered in the year-on-year growth for the rest of the year.

Barclays economist Leong Wai Ho said that could mean a large firm rationalising its capacity or a relocation. However, he added that there was little to be worried about in the long term.

“We interpret this to mean a permanent, one-off reduction in production capacity in this area … Though the weakness in electronics was disappointing, we remain confident that Singapore is well placed to benefit from the recovery in external demand, particularly from the G3,” he said. The G3 refers to the economies of the United States, eurozone and Japan.

The decline in electronics was cushioned by a strong 23.8 per cent on-year growth in the biomedical manufacturing cluster as pharmaceuticals output grew 26.5 per cent last month, figures from the EDB showed. The chemicals cluster enjoyed an expansion of 8.9 per cent, largely driven by the 19.2 per cent increase in petrochemicals output.

Economists said with the recovery gaining pace in the US and Europe, manufacturers here should experience a pick-up in activity.

“I think with global growth picking up, we should see gradual improvements in terms of industrial activity in Singapore in the second half of this year,” said Credit Suisse economist Michael Wan. “Electronics will likely grow in tandem with that.

“The US will probably be a key driver, and Europe, too, to some extent. There are some risks in China and Japan, but I think Singapore is still much more dependent on US and Europe, so things should pan out quite well in the next few months,” he added.

Mr Leong is upbeat as well, citing the EDB business sentiment survey in April showing manufacturers’ optimism that business conditions will improve in the next six months. “The US investment cycle is improving, which broadly means that companies there are increasing the size of their IT budget this year. This means more orders for hardware makers in North Asia, but some of that should trickle down to South-east Asia and Singapore is one of the centres of IT production.”

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