Singapore’s manufacturing output has expanded by 11.2% y-o-y in August, according to data released by the Economic Development Board on Sept 24.
This marks the tenth straight month of growth and beats market estimates of 8.2% y-o-y growth.
Excluding biomedical manufacturing, output grew 13.6% y-o-y. On a three-month moving average basis, manufacturing output increased 18.3% in August compared to a year ago. On a seasonally adjusted month-on-month (m-o-m) basis, manufacturing output increased 5.7%.
With the exception of biomedical manufacturing, all clusters registered broad-based growth in the month of August
Transport engineering output expanded 23.5% y-o-y in August, led by the marine & offshore engineering and aerospace segments which rose 36.9% and 22% respectively. The levels of activity in the shipyards and aerospace firms had increased from a low base last year when new orders were impacted by the weak global oil & gas market and international travel restrictions respectively amid the Covid-19 pandemic.
Precision engineering output increased 22.9% y-o-y in August, largely attributed to the machinery & systems segment, which grew 33.1% with a higher output of semiconductor and industrial process equipment.
Electronics output increased 15.4% y-o-y in August. Except for the computer peripherals & data storage segment, all segments recorded output growth. In particular, the semiconductors segment grew 16.8%, supported by demand from 5G markets.
General manufacturing output grew 6.2% y-o-y in August, lef by the miscellaneous industries segment grew 33.2% from a low base last year, when demand for construction-related materials was adversely affected by Covid-19.
Conversely, the food, beverage & tobacco and printing segments fell 6% and 16.7% respectively, with the former recording lower production of milk powder due to weaker export demand.
Chemicals output grew 0.4% y-o-yin August. The petroleum segment recorded an output growth of 22.1% from the low production base a year ago due to lower export demand amid the Covid-19 outbreak. Conversely, the specialties, petrochemicals and other chemicals segments contracted 0.3%, 0.7% and 1.5% respectively. In particular, the petrochemicals recorded lower production due to plant maintenance shutdowns.
In contrast to the other clusters, biomedical manufacturing output contracted 0.6% y-o-y in August. While the medical technology segment rose by 8.2% y-o-y on the back of higher export demand for medical devices, the pharmaceuticals segment declined 3.4% due to a different mix of active pharmaceutical ingredients.
UOB economist Barnabas Gan points out that y-o-y growth in August manufacturing output beat market estimates of 8.2%. "The strong performance in August came despite the high base in the same period last year," he says. "All industries, except biomedical manufacturing, expanded in August 2021, thus reinforcing a broad recovery backdrop for Singapore’s manufacturers," he adds.
Gan has maintained his full-year manufacturing growth outlook at 8% in 2021. He remains positive on Singapore’s precision engineering and electronic clusters on the back of healthy global semiconductor demand. Separately, a continued recovery in global economic backdrop should support Singapore’s general manufacturing cluster. "Overall, the ongoing global economic recovery, coupled with a strong global trade backdrop and higher Covid-19 vaccination rates in Singapore’s key trading partners, underlines a “Covid-resilient” environment in the foreseeable future," he says.
For Selena Ling, OCBC Bank's head of treasury research and strategy, Singapore's manufacturing momentum is likely to ease into 4Q2021. "The low base effects are fading, and the Delta resurgence had contributed to the tightening of restriction measures under the return to Phase 2 (Heightened Alert) between 22 July to 18 August. External demand also likely have plateaued with growth momentum having peaked in the major economies like the US and China," she says.
Ling also notes that other headwinds could include the US Federal Reserve's intended taper of its bond purchase program, China’s regulatory crackdown and the rising domestic Covid cases.
Nonetheless, she has maintained her full-year growth forecast of 10% y-o-y, noting that manufacturing output has expanded 14.3% y-o-y in the first eight months of 2021.
The Singapore Research team at RHB also expects manufacturing output growth to moderate from September given the higher base effect and the slowdown in manufacturing activities in major trading partners.
"In terms of manufacturing subcomponents, we continue to expect the semiconductor related clusters such as precision engineering and electronics to continue to benefit from the continuous global demand from the semiconductor industry and the 5G market," the team adds.
Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye share the same sentiments, noting that the high base effects will kick in from September onwards, driven by pharmaceuticals and semiconductors. They point out that for semiconductors, while demand for chips will remain resilient, production is already operating at near full capacity.
"Fresh investments – from the likes of Micron, Infineon, ST Microelectronics and GlobalFoundries - will expand chip manufacturing capacity but this will likely materialise in 2022 at the earliest," the analysts remark.
Photo: Tiong Woon