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Singapore's factory output drops 6.7 per cent in June in second straight month of decline

SINGAPORE — Factory output in Singapore dropped 6.7 per cent in June from the same month a year ago, dragged down by the volatile biomedical cluster and the transport engineering segment, the Economic Development Board (EDB) said on Friday (July 24).

Despite drops in May and June, manufacturing output expanded 3.5 per cent in the first half of this year, driven by high growth in semiconductor production and an overall increase in demand for biomedical products.

Despite drops in May and June, manufacturing output expanded 3.5 per cent in the first half of this year, driven by high growth in semiconductor production and an overall increase in demand for biomedical products.

  • Biomedical and transport engineering segments were main drags to output
  • Factory output still rose in the first half of the year overall
  • Economists say June’s disappointing output will affect economic forecasts

 

SINGAPORE — Factory output in Singapore dropped 6.7 per cent in June from the same month a year ago, dragged down by the volatile biomedical cluster and the transport engineering segment, the Economic Development Board (EDB) said on Friday (July 24).

This is the second straight month of decline, following an 8.1 per cent drop in May.

Nevertheless, over the first six months of the year, manufacturing output expanded 3.5 per cent, driven by high growth in semiconductor production and an overall increase in demand for biomedical products. 

A LOOK AT JUNE’S NUMBERS

Biomedical manufacturing: 

Medical technology firms produced 5.9 per cent more output last month to meet export demand for Covid-19-related medical devices.

But overall, biomedical output declined 30.6 per cent, due to a sharp drop in the manufacturing of pharmaceutical products. 

Transport engineering: 

As air travel ground to a halt, transport engineering output dropped 33.9 per cent in June compared with a year ago. 

The aerospace segment contracted 23 per cent due to lack of demand for aircraft repair and maintenance. 

The marine and offshore engineering segment was also severely impacted, declining 53.5 per cent, as movement restrictions on foreign workers have slowed work in the shipyards.  

Electronics: 

This cluster helped anchor the manufacturing industry, with a 17.3 per cent increase in output in June this year from a year ago. 

This was largely supported by the semiconductor sub-segment, which produced 26 per cent more in output to meet equipment demand for cloud services, data centres and 5G networks. 

Precision Engineering: 

Factory output in this cluster rose 9.1 per cent over the same period, helped by higher production of semiconductor equipment. 

Chemicals: 

Total output fell 12.1 per cent in June from the same month last year. 

With closures of plants and lower export orders due to the pandemic, all but one segment in this cluster recorded declines. 

The exception was the petrochemical sub-segmented, which saw an uptick. 

General manufacturing: 

Production declined by 13.9 per cent in June compared with a year ago. 

Food, beverage and tobacco production fell by 2.7 per cent.

Output of goods related to the construction industry, grouped under “miscellaneous industries”, fell by 26.5 per cent. 

WHAT DO THE NUMBERS MEAN? 

Despite the overall growth in manufacturing output between January and June, economists say last month’s manufacturing numbers are disappointing and that this will likely mean that Singapore’s economy shrank even more than initially expected in the second quarter.

Earlier this month, the Ministry of Trade and Industry issued advanced estimates of the economy’s performance from April to June, showing that it likely shrank 12.6 per cent from the same quarter a year ago. 

The MTI estimates had also indicated that the manufacturing sector grew by 2.5 per cent in the second quarter of the year from the same period last year.

Mr Barnabas Gan, an economist at United Overseas Bank, said that this is now unlikely to be the case, as June’s manufacturing numbers would have had to be in positive territory for the final growth figure to hit that level. 

Still, Mr Gan noted that the sector has helped to prop up Singapore’s economy for the first half of the year, boosted mainly by biomedical manufacturing.

Biomedical manufacturing had seen a surge in production since the start of this year, growing for five straight months before a drastic drop in June. 

Mr Howie Lee, an economist at OCBC Bank, said the initial months of the Covid-19 pandemic had led to many countries attempting to secure and stockpile critical medical supplies. 

“From here on, however, we expect many countries to have achieved reasonable adequacy in necessary biomedical supplies and that may result in the stabilisation of demand for Singapore’s biomedical goods,” he said. 

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EDB manufacturing factory output

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