Singapore’s manufacturing sector broke its 10-month growth streak in September with a 3.4% contraction, no thanks to a shrinkage in the output of the biomedical segment.

The latest showing is a turnaround from August’s 11% expansion, and is more severe than the median decline of 0.9% forecast by private-sector analysts in a Bloomberg poll.

Excluding contributions from the biomedical segment, manufacturing output widened to 9.4% y-o-y, according to data released by Singapore’s Economic Development Board (EDB), a government agency under the <a href="https://www.theedgesingapore.com/tags/ministry-trade-and-industry-mti" target="_blank">Ministry of Trade and Industry (MTI)</a>.

This comes as output from the biomedical cluster – which has been rather volatile in the past year – tumbled by 35.9% y-o-y. This is worse than the 1.7% dip seen in the month before and follows a 46.2% plunge in the pharmaceuticals segment as a different mix of active pharmaceutical ingredients were being produced compared to the year before.

<hr/>See: <a href="https://www.theedgesingapore.com/news/singapore-economy/singapores-manufacturing-output-30-y-o-y-may-low-base-2020-exceeding-analysts" target="_blank">Singapore's manufacturing output up by 30% y-o-y in May on low base in 2020, exceeding analysts' expectations</a><hr/>

A further decline in the cluster’s output was mitigated by a 2.4% increase in its medical technology segment due to sustained export demand for medical devices.

General manufacturing also printed a contraction of 2.7% in September, thanks to a 21.0% jump in its miscellaneous industries segment due to the low base in 2020 when demand for construction-related products took a hit from the Covid-19 safe management measures.

The remaining segments recorded an increase in output, with a strong push seen in the 30.2% jump in precision engineering. This follows a 38.4% surge in its machinery & systems segment due to higher output of semiconductor and industrial process equipment.

A further lift came from a 13.5% rise in the precision modules & components segment, which saw higher production of optical products, plastic and metal precision components as well as dies, moulds, tools, jigs and fixtures.

The transport engineering segment similar saw a 12.95 expansion in output. This was led by expansions to the aerospace (21.7%) and marine & offshore engineering (9.9%) segments as the order intake picked up from an easing of travel restrictions and an improvement in the oil & gas market.

In the same vein, the chemicals sector saw a 12.4% growth in output. Expansions were seen in the petroleum (26.1%) and petrochemicals (18.6%) segments compared to a year ago when production was weighed down by plant maintenance shutdowns and weaker export demand.

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Output from the other chemicals segment rose by 9.9% on the back of higher production of fragrances while the specialties segment recorded a decline of 1.5%.

Meanwhile, output from the linchpin electronics sector edged up by 4.9% y-o-y, with all segments recording expansions except for computer peripherals & data storage.

On a seasonally adjusted, monthly basis, industrial production decreased by 2.8% in September, or 5.1% when biomedical manufacturing was excluded.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye say that the contraction is “likely a blip due to the exceptionally high base last year”.

“We expect manufacturing growth to return to positive territory in October, although growth will likely be in the single-digit pace as semiconductors are likely operating at near full capacity,” they observe.

Chua and Lee expect a stronger performance in the transport engineering segment as aerospace recovers amid the border reopening while the marine & offshore segment gets a lift from a stronger oil & gas market.

To this end, they are expecting 3Q2021 GDP to come in at 6.5%, with the slightly weaker-than-expected manufacturing performance being offset by a small upgrade in services.

Going forward, Chua and Lee say that consumer-facing services such as accommodation & food services and retail trade will likely take longer to normalise with the dining-in and social restrictions, despite the gradual reopening of borders in 4Q2021.

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