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SINGAPORE (Aug 26): Singapore’s manufacturing output in July dropped to 0.4% compared to a year ago, according to data released by the Economic Development Board (EDB) on Monday.

On a three-month moving average basis, manufacturing output decreased 3.5% y-o-y for the month.

However, on a seasonally adjusted m-o-m basis, manufacturing output was 3.6% higher. Manufacturing output grew 9.4% m-o-m when excluding biomedical manufacturing.

Among the manufacturing clusters, the general manufacturing cluster saw the highest output growth at 6.9% y-o-y. On a YTD basis, output was 2.9% higher y-o-y.

This was mainly due to a 10.8% growth in the miscellaneous industries on account of higher production of metal tanks & containers and wearing apparel, while the food, beverages & tobacco segment expanded 7.0% with higher output of beverage products. But printing output was 7.8% lower y-o-y.

Both the chemicals and biomedical manufacturing clusters saw a 2.2% and 0.8% y-o-y growth in July, respectively.

For the chemicals sector, the increase in output was mainly attributable to a 13.1% and 4.2% growth in the other chemical and specialty chemicals, respectively, with the former recording higher output in fragrances. However, the petrochemicals and petroleum segments contracted, mainly due to maintenance shutdowns in some plants.

For the biomedical manufacturing cluster, July’s output increase was mainly due to the medical technology segment expanding 17.7% y-o-y on the back of higher export demand for medical devices. The volatile pharmaceutical segment saw a 4.8% y-o-y decline.

On the other hand, the precision engineering cluster saw the biggest decline among the manufacturing clusters. Output fell 7.5% y-o-y in July and was 8.7% lower y-o-y on a YTD basis. The precision modules & components segment grew 6.7% on the back of higher output in optical products. But this increase was offset by the machinery & systems segment recording lower output in semiconductor foundry equipment and refrigeration systems.

The transport engineering cluster recorded rather flattish growth in July compared to a year ago, with a 0.2% y-oy decline. Within the cluster, the land and marine & offshore engineering segments fell 0.7% and 10.8% respectively, with the latter registering lower levels of offshore, shipbuilding and repairing activities.

Meanwhile, the electronics cluster contracted 0.9% y-o-y in July, despite the data storage and semiconductors segments growing 1.8% and 0.3% respectively. This was due to the rest of the electronic segments recording a contraction in output.

According to DBS, July's manufacturing output number is perhaps the first sign of respite after many months of doldrum and disappointment.

"While the headline number continues to remain in the red, it has improved from a bigger decline of 8.1% for the previous month. Note also that the improvement came about despite a sub-par performance from the biomedical manufacturing cluster (0.8% y-o-y)," says DBS senior economist Irvin Seah.

Seah also says the electronics cluster has become less of a drag. Output fell by just 0.9% y-o-y as compared to -18.2% previously. DBS had previously highlighted that a turnaround in the growth for global semiconductor equipment billings could possibly suggest light at the end of the tunnel for this cluster, but the most recent developments in the trade disputes between the US and China have once again cast a shadow on that hope.

"Indeed, great uncertainties remain not just for the electronics cluster but for the overall trade outlook as well," adds the analyst.

DBS also says the main silver lining in the announcement was the 3.6% m-o-m expansion in industrial output compared to that a month ago. Without biomedical, this will be even stronger at +9.4% m-o-m sa.

Besides pointing to a better industrial performance ahead, Seah says the expansion suggests a "lower risk of a technical recession in Singapore" if it can be sustained in the coming months.

"While today’s figure is in favour of our view that Singapore could avert a technical recession, the odds are still stacked against this contrarian call judging from the challenging external environment. Nonetheless, the jury is still out on that matter. Only time will tell," says Seah.

This article was updated at 3.49pm to reflect the quotes given by DBS analyst Seah