SINGAPORE – Singapore’s factory output fell sharply again in August after short-lived hopes for a turnaround in July, bogged down by electronics production, which saw its biggest monthly slump since 2012.
Factory production slid by 8 per cent from a year ago, marking its worst performance since December 2015. It is also manufacturing’s fourth straight month in negative territory and reignites the risk of a technical recession in the third quarter.
July’s much-improved showing had raised hopes that the Singapore economy, which shrank 3.3 per cent in the second quarter from the previous three months, would avoid a consecutive quarter-on-quarter contraction that would send it into a technical recession.
Manufacturing was dragged down in August mostly by the electronics and precision engineering clusters, which cumulatively make up just above 40 per cent of its industrial production, UOB economist Barnabas Gan told The Straits Times. Excluding the biomedical sector, year-on-year output last month tumbled 12.4 per cent.
The latest figures were sharply below expectations. Analysts polled by Bloomberg had tipped August output to decline by just 0.6 per cent after July’s data raised hopes that manufacturing had stabilised. Output dipped by just 0.1 per cent in July, revised up from an earlier 0.4 per cent rise, according to the latest Economic Development Board figures on Thursday (Sept 26).
On a seasonally adjusted month-on-month basis, Singapore’s manufacturing output fell 7.5 per cent last month, reversing from a 3.6 per cent rise in July. Excluding biomedical manufacturing, output sank 12.1 per cent.
“If you recall what happened with the US-China trade talks, after the Group of 20 Summit, things broke down and it was only towards the last one to two weeks that there seemed to be a glimmer of hope for a trade deal of sorts,” said OCBC Bank’s head of treasury research and strategy Selena Ling.
“August was really in that black space in between hope and gloom,” she added.
She noted that electronics output remained weak and that with the August numbers, analysts may need to recalibrate their third-quarter growth expectations.
Mr Gan from UOB added that “the risk of a technical recession has increased”, although this will ultimately depend on the September figures.
He also noted that if incoming data is worse than expected, there is an increasing probability the Monetary Authority of Singapore will take a more drastic step in easing monetary policy in its upcoming October statement.
Manufacturing in Singapore has been hit by a downswing in the global tech cycle, fallout from an escalating trade war, as well as slowing growth in China.
It is not the only regional economy to be hit by the confluence of external factors, with both Thailand and China also seeing industrial production growth falling in August.
Electronics output in August contracted 24.4 per cent from a year ago, which Mr Gan noted was the worst performance for the sector January 2012’s 28.4 per cent year-on-year fall. Semiconductor production – the biggest segment – plunged by 29.6 per cent, after a brief 1.4 per cent rise in July. Only the data storage, as well as the infocomms and consumer electronics segments recorded gains.
Cumulatively, the electronics cluster’s output fell 7.8 per cent in the first eight months of this year, compared to the same period last year.
Precision engineering output dropped 13.6 per cent. Overall, the precision engineering cluster fell 9.3 per cent in the first eight months of 2019, compared with the same period last year.
Biomedical manufacturing provided the most support, with output expanding 10.6 per cent.