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Factory output surge offers silver lining for Singapore economy

SINGAPORE — Manufacturing output in September grew at its fastest pace in more than two years as both the biomedical and electronics clusters sizzled, surprising analysts, who say the unexpected surge raises prospects of an upward revision to third-quarter gross domestic product growth.

Reuters file photo

Reuters file photo

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SINGAPORE — Manufacturing output in September grew at its fastest pace in more than two years as both the biomedical and electronics clusters sizzled, surprising analysts, who say the unexpected surge raises prospects of an upward revision to third-quarter gross domestic product growth.

However, there are doubts over the sustainability of the rally, given the still-subdued external outlook.

“In the midst of mainly negative news on employment, trade and growth, the positive development in the manufacturing output is a welcome relief,” said Dr Tan Khay Boon, a senior lecturer at SIM Global Education. “Nevertheless ... there is still no sign of a significant recovery in world demand in sight. Low oil prices continue to depress the marine and offshore engineering segment in the transport engineering cluster and the only consistent bright spot is the medical technology segment in the biomedical manufacturing cluster.”

From a year earlier, industrial production rose by 6.7 per cent, up from August’s 0.5 per cent rise and the largest increase since March 2014, data from the Economic Development Board showed yesterday. The median forecast in a Reuters survey was a rise of 0.6 per cent.

On a seasonally-adjusted month-to-month basis, manufacturing output rose 3.3 per cent, compared with an increase of 0.2 per cent in August and the median forecast for a contraction of 2.6 per cent. DBS senior economist Irvin Seah said: “This is perhaps the brightest spark in a long string of poor economic data over the past months … The surge (in industrial production) will certainly bring about an upward revision in the GDP figures for the third quarter.”

Electronics output grew 15.9 per cent year-on-year to clock its seventh straight month of positive growth, noted OCBC economist Barnabas Gan. “Specifically, the semiconductor cluster posted its seventh straight month of positive growth, and in absolute terms, printed its highest value since March 2011,” he added.

In the volatile biomedical cluster, production turned around strongly after three months of contractions to post a 22.2 per cent expansion, thanks to a 26.9 per cent surge in pharmaceutical output. Mr Seah said: “Ironically, the cluster was the main drag over the past two months as key producers shut down their plants for maintenance and sterilisation of equipment before embarking on the production of a new product mix … With production levels now back to normal, expect better showings in the coming few months.”

In the other clusters, precision engineering increased 5.4 per cent, while general manufacturing industries grew 5.6 per cent and chemicals remained unchanged.

The only industry cluster to post a contraction last month was transport engineering. UOB senior economist Alvin Liew said: “The decline ... worsened in September solely due to the persistent contraction seen in marine and offshore engineering activity, even as the aerospace and land sub-clusters returned to growth in the month.”

He added: “Rig building and demand for oilfield and gasfield equipment remained weak in the current subdued oil price environment and this weakness is likely to persist for the rest of 2016 at least.”

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