Singapore’s manufacturing output increased by 2.2% y-o-y in June, moderating from the 13.8% y-o-y growth seen in May. The growth is also the slowest seen since January and fell short of the 5.4% y-o-y growth estimate pencilled in by Bloomberg economists.

The lower output, which was due to declines seen in the biomedical manufacturing and chemicals clusters, did not surprise OCBC Bank's Selena Ling, who is its chief economist and head of treasury research & strategy.

"Gravity has finally caught up with the global electronics especially chip industry. Global manufacturing purchasing managers' index (PMIs) have pulled back of late. Anecdotally, even Apple is offering product discounts in China which is illustrative of the demand slowdown story. So it did not totally [come as a surprise] that Singapore’s industrial production also eased to 2.2% y-o-y in June," Ling says.

Excluding biomedical manufacturing, output grew by 4.2% y-o-y, again easing from May’s 18.0% expansion.

On a seasonally adjusted m-o-m basis, manufacturing output decreased by 8.5% in June, reversing from the 10.9% growth seen in May

Excluding biomedical manufacturing, June’s output fell by 6.9%, down from May’s expansion of 9.8%.

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On a three-month moving average basis, manufacturing output rose by 5.7% y-o-y in June.

In June, output for the transport engineering cluster expanded by 32.0% y-o-y in June. Within the cluster, the marine & offshore engineering segment increased by 44.0%, thanks to a higher level of work done in ship repair and offshore projects.

The aerospace segment grew 32.2% due to the easing of global air travel, which led to the higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines. In the first six months of this year, output of the transport engineering cluster expanded 17.7% compared to the same period in 2021.

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Output within the general manufacturing cluster expanded by 10.1% in June with all segments seeing an increase in output.

The printing segment grew by 12.2% while the food, beverage & tobacco segment expanded by 9.7% thanks to the higher output of beverage and milk products.

The miscellaneous industries segment increased 9.5% with higher production of structural metal products and wearing apparel. Cumulatively, the general manufacturing industries cluster expanded 12.3% for the six-month period compared to the same period a year ago.

The precision engineering cluster recorded an output expansion of 5.6% y-o-y. Within the cluster, the machinery & systems segment grew by 6.4%, on account of the higher output of semiconductor-related equipment. The precision modules & components segment increased by 4.7% with higher production of plastic and metal precision components. Overall, the precision engineering cluster increased 4.8% in the first six months of 2022 compared to the same period last year.

Output for the electronics cluster rose by 2.3% y-o-y in June, a "stark" difference compared to the previous 22.9% y-o-y growth. Within the cluster, the infocomms & consumer electronics and computer peripherals & data storage segments recorded output increases of 38.3% and 4.7% respectively. The growth was offset by the 2.6% y-o-y decline seen in the output of the semiconductors segment and the 23.5% y-o-y decline from the other electronic modules & components segment. Year-to-date (ytd), output for the electronics cluster grew by 9.2% on a y-o-y basis.

Output for the biomedical manufacturing cluster fell by 9.2% as the pharmaceuticals segment contracted by 24.9%. This was due to a different mix of active pharmaceutical ingredients being produced. The medical technology segment, on the other hand, rose by 14.3% y-o-y with higher demand for medical devices from the US and China.

Overall, the biomedical manufacturing cluster decreased 4.0% y-o-y in the period from January to June.

To stay ahead of Singapore and the region’s corporate and economic trends, <a class='gtm_see_also_3_inread' style='text-decoration: underline;' href='/section/latest?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>click here for Latest Section</a>

The chemicals cluster saw output decline by 11.0% in June as output for the petroleum, petrochemicals and other chemicals segments declined 2.4%, 15.7% and 27.6% respectively. The petrochemicals segment recorded lower production amidst plant maintenance shutdowns while the other chemicals segment reported lower output of fragrances. The decline was slightly mitigated by the 3.9% growth in output from the specialties segment due to the higher production of food additives. On a ytd basis, output of the chemicals cluster declined 3.7% y-o-y.

With the lower output for the electronics, chemicals and biomedical clusters seen in June, it was "unsurprising" to OCBC's Ling that overall industrial production data is starting to disappoint. That said, June's figure came in close to her forecast for 2.2% y-o-y.

"The saving grace is that transport engineering (+32.0% y-o-y) is getting a second wind with the pickup in maintenance, repair and operations (MRO) activity as international travel resumes, and the precision engineering segment remains in positive growth territory for now (5.6% y-o-y)," she writes.

"With the recession fears there may be a lot more tightening of belts across businesses in terms of their IT budgets and also for consumer demand for electronics products going ahead. the big US tech firms are already talking about slowing/freezing hiring, so there may be cascading effects on market sentiments and consumer confidence," Ling notes. "Given very aggressive major central bank tightening, the risk of policy mistake-induced downturn on the global landscape is looming larger," she adds.

Looking ahead, Ling is estimating Singapore's manufacturing growth to come around in the low single digital y-o-y growth range given the high base seen in 2H2022 and the global growth slowdown/recession concerns across major economies like the US, EU and China.

"My forecast for 2H2022 manufacturing growth is around 2.6% y-o-y, which would bring full-year manufacturing growth to around 5+% y-o-y for 2022 assuming there is a sharper than expected deceleration of global demand and GDP growth does not materialise," says Ling.

As Singapore's June manufacturing growth stood below UOB's expectations, the bank's senior economist Alvin Liew continues to be "cautiously positive" on the outlook for electronics, transport engineering, general manufacturing, and precision engineering to drive overall industrial production (IP) growth.

"But we are also cognizant there is an easing trend in sales since the peak in June 2021 about the attendant external risks," he adds.

The risks include higher commodity prices on the back of the Russo-Ukrainian conflict, global supply disruptions from China's zero-Covid-19 policy, the tightening of monetary policies in the advanced economists thereby slowing growth and the resurgence of Covid-19 infections or new variants.

"In addition, another dampener to headline growth is the relatively higher base levels for the rest of 2022," continues Liew, as he maintains his full-year growth forecast at 4.5%.

Singapore's manufacturing output moderates to 2.2% in June

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