Worse-than-expected performance raises concerns over recovery in key manufacturing sectors
Singapore’s factory output fell 3.9% year on year in June 2024, a sharp contrast to the revised 2.3% growth recorded in May. This performance was worse than economists’ expectations, who had forecast a median 0.1% contraction.
Excluding the volatile biomedical sector, output declined by 1.6% year on year in June, reversing from the 9.5% growth in May. The sharpest decline occurred in the electronics sector, which slid 5.5% year on year, reversing the previous month’s 18.6% growth. Notably, all segments in the electronics sector recorded growth, except for semiconductors, which contracted by 9.4%.
Key Drivers of Decline
Electronics Sector: A lag in Southeast Asia’s electronics production, compared to North-east Asia, is attributed to its role in global value chains. The demand for high-end chips produced in South Korea and Taiwan, driven by advances in AI, has not yet significantly boosted the production of lower-end chips used in consumer electronics and cars, which are primarily produced in Singapore and other regional areas.
Biomedical Sector: Biomedical manufacturing saw the sharpest drop in output, contracting by 23.2% in June, though the decline was slower than May’s 43% fall. Pharmaceuticals suffered a 47.1% decrease in output due to changes in the mix of active pharmaceutical ingredients being produced, while medical technology saw a modest 11.4% rise.
Despite these setbacks, some sectors displayed positive growth:
Transport Engineering: Output rose by 10.3% year on year, driven by a 19.5% increase in marine and offshore engineering and a 12.4% rise in aerospace manufacturing.
Chemicals and General Manufacturing: The chemical sector grew by 5.9%, while general manufacturing saw a modest increase of 1.6%.
On a monthly, seasonally adjusted basis, manufacturing output fell 3.8% in June, reversing May’s 0.5% growth. Excluding biomedical manufacturing, production dropped by 6.4%.
Outlook
Economists remain hopeful for a gradual recovery, particularly in the electronics sector, where demand is expected to benefit from the global tech upcycle, driven by the replacement of smartphones and PCs, as well as the growing use of artificial intelligence applications. However, the biomedical sector’s decline remains a concern, as does the broader manufacturing sector’s slow recovery in the second half of the year.
