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Manufacturing output up 19.1% in August in boost to Q3 growth

SINGAPORE — The Republic’s manufacturing performance continued to beat expectations last month, with economists saying the strong August report card will boost economic growth in the third quarter.

SINGAPORE — The Republic’s manufacturing performance continued to beat expectations last month, with economists saying the strong August report card will boost economic growth in the third quarter.

Led by growth in the electronics and biomedical manufacturing clusters, total manufacturing output rose 19.1 per cent last month from August a year ago, easing slightly from the revised 21.2 per cent expansion in July, data from the Economic Development Board (EDB) showed on Tuesday (Sept 26). Economists polled by Reuters had expected total output to rise 14.2 per cent year-on-year in August, thanks to the robust global demand for electronics.

“Indeed, electronics will likely remain in the driving seat while biomedical is the swing factor,” said DBS senior economist Irvin Seah. Excluding the lumpy biomedical manufacturing cluster, output grew 17.8 per cent, the EDB data showed.

“Growth in China has been resilient despite earlier concerns of slower growth. And economic momentum in the United States and eurozone has also been picking up. Such phenomena are expected to persist in the near term, which will be manifested in healthy industrial production and export numbers for Singapore,” added Mr Seah. China, Asia’s biggest economy, is also Singapore’s largest export destination.

With the strong export and industrial production performance in July and August, economic growth for the third quarter will accelerate from that in the second quarter, he added.

Economists from DBS, United Overseas Bank (UOB) and Maybank Kim Eng expect third-quarter gross domestic product growth to range from above 3 per cent to 4.3 per cent. The Singapore economy had grown by 2.9 per cent year-on-year in the second quarter.

Nonetheless, UOB economist Francis Tan expects overall manufacturing output growth to slow to about 7.5 per cent year-on-year this month, due to high base effects and a cooling down of the electronics boom.

“Although we remain optimistic in the continuing growth for the electronics and precision engineering clusters in 2017, we believe the double-digit growth for semiconductor production may slow into the single digits as we proceed towards the end of the year and on to 2018, due to base effects and slower second-half capital expenditure growth expected in China,” said Mr Tan.

Last month, the electronics cluster, which accounts for close to one-third of total manufacturing, grew 38.7 per cent year-on-year, easing from the previous month’s stellar 49.4 per cent growth. This continued to be led by semiconductors, which posted 55.7 per cent growth in August.

The volatile biomedical manufacturing cluster achieved 25.1 per cent year-on-year growth last month, accelerating from the 4.5 per cent growth in the preceding month, helped by both the pharmaceuticals and medical technology segments.

The chemicals, precision engineering and transport engineering clusters also posted year-on-year expansions last month — at 1.8 per cent, 10.7 per cent, and 5.5 per cent, respectively. Meanwhile, the general manufacturing cluster contracted 0.6 per cent, after the 4.7 per cent growth in the previous month, as the growth in the food, beverages and tobacco segment was unable to offset the declines in the printing and miscellaneous industries segments.

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