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Factory output ‘to moderate after jump last month’

SINGAPORE — Factory production rose more than expected last month from February a year earlier, thanks to a surge in chip output, but analysts expect wobbly global conditions to weigh on the manufacturing sector in the months ahead.

A man looks at a cluster of factories at an industrial park in Singapore. Reuters file photo

A man looks at a cluster of factories at an industrial park in Singapore. Reuters file photo

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SINGAPORE — Factory production rose more than expected last month from February a year earlier, thanks to a surge in chip output, but analysts 
expect wobbly global conditions to weigh on the manufacturing sector in the months ahead.

Manufacturing output rose 12.6 per cent year-on-year in February, showed data from the Economic Development Board on Friday (March 24), exceeding the median economists’ forecast of a 10.8 per cent expansion in a Reuters survey. 

The growth was an acceleration from January’s 2.2 per cent increase, which in turn was a sharp slowdown from December’s 22.1 per cent gain.

Analysts said January and February single-month data was partly skewed by distortions due to the long Lunar New Year holidays, which fell in February last year but January this year. Many factories close or scale back operations during this period.

February industrial production was driven by a surge in electronics output, which grew 39.8 per cent compared with the same month last year. 

This was mainly due to the semi-conductors segment, which posted robust growth of 63.6 per cent. 

Another cluster that performed strongly was precision engineering, where output expanded 26.2 per cent. 

Meanwhile, the biomedical manufacturing cluster’s output fell 2.6 per cent year-on-year in February, weighed down by the 8.7 per cent decline in the pharmaceuticals segment, due to a different mix of active pharmaceutical ingredients produced and lower output of biological products. Excluding biomedical manufacturing, overall output grew 17.1 per cent in February.

The factory data comes after non-oil domestic exports grew in February at the strongest pace in five years, jumping 21.5 per cent from a year earlier, thanks to a surge in demand of electronics products and a sharp rise in shipments to China.

Despite the better-than-expected performance last month, analysts said manufacturing output will begin to moderate in the coming months as regional demand slows. 

“There should be some cuts in the China smartphone market and demand,” said Credit Suisse analyst Michael Wan, noting that additional tightening in China’s property sector will also slow domestic demand.

Singapore has had lacklustre economic growth in the past two years amid sluggish external demand. 

Growth picked up late last year, with the economy expanding at a faster pace in the final three months than initially thought. Most analysts now expect the Monetary Authority of Singapore to keep monetary policy unchanged at its next policy review.

“We expect policy to remain unchanged at the April policy review — most likely to be scheduled the week of April 10,” said JP Morgan analyst Benjamin Shatil. “That said, the accompanying statement will likely recognise the evolution of the outlook since last October, perhaps noting the possibility of a turn in global demand that could sustain a broader-based recovery in domestic activity, alongside a modest turn in the core inflation outlook.”

However, the outlook for the coming months remains hostage to policy and protectionist risks in the United States. “There’s a bit too much optimism about tax cuts and fiscal policy boosts from the US, so that should crimp the growth momentum a bit as we move into the next few months,” said Mr Wan. AGENCIES

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