SINGAPORE (Jan 29): Singapore’s industrial production came in lower than expected in December, falling 0.7% year-on-year on the back of declines, mainly in transport engineering (-14.1%) and general manufacturing (-10.0%).

Excluding biomedical manufacturing, output would have plunged 3.2% in December, according to data released on Jan 24 by the Singapore Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).

The latest decline extends November’s 8.9% decline.

Even so, it falls just short of the 0.6% decline predicted by private-sector economists, amid forecasts of a bottoming-out in manufacturing this year.

On a seasonally adjusted month-on-month basis, manufacturing output increased 4.1% – making it the fastest month-on-month pace of increase in five months. Excluding biomedical manufacturing, December’s output was up 1.1%.

Including December’s factory output, Singapore’s full-year 2019 industrial production was down 1.4%, with biomedical and general manufacturing being the only clusters that recorded full-year output growth.

Growth of the biomedical cluster was driven by the pharmaceutical segment, which saw a 20% increase in the medical technology segment, from higher export demand for medical devices in December. The cluster also benefitted from a 6.9% growth in pharmaceutical output, particularly biological products.

For the full year, the segment saw a 10.7% expansion in its output.

Precision engineering also saw growth with a 7% increase in output, after a largely lacklustre performance in 2019. This comes from a 19.1% growth in precision modules and components.

However, the segment had a 2.5% contraction in 2019 on the back of declines in electronics output. 2019 was a bad year for the electronics sector – making it the worst performer with its 7.4% contraction in output.  This comes as it was weighed down by trade war tariffs and the semiconductor slowdown.

For now, economists expect the worst to be over.

According to Barclays economist Brian Tan, “firmer signs of electronics bottoming out” is seen from December’s figure, even though “output remains weak and well behind the recovery in exports of electronics”.

Meanwhile, general manufacturing was down 10% in December, dragged by a 20.2% decline in food, beverages and tobacco output. This follows lower production, particularly, of milk powder and beverages. Even so, the cluster recorded a full-year growth of 1.5%.

Aside from this, chemical output was down by 5.2% in December, following declines across all its segments of petroleum products (-2.5%), petrochemicals (-8.5%) and specialities (-5.4%). Overall, full-year output was down 2%.

Transport engineering output was also down 14.1% in December. This comes from the 31.2% drop in marine and offshore engineering, which could not offset the increased output in the land and aerospace sectors. The decline was also seen in its 1.8% contraction in full-year output.

The substantial declines in output across segments may provide upside to Singapore’s growth says Selena Ling, Head of Treasury Research and Strategy at OCBC Bank. “The milder December contraction in industrial production implies potential upside for the 4Q19 GDP growth estimate and it could be revised up to 1.0% y-o-y, and in turn, full-year 2019 GDP growth could be revised up to around 0.8% y-o-y as well,” she observes.

Economists at RHB agree, pointing out that December’s production reflects a recovery in most of the manufacturing clusters.  

To this end, they are looking at the index growing gradually to see a gain of 3% this year.