June’s factory output drops sharply, underperforming forecasts due to electronics and biomedical struggles
Singapore’s factory output decreased by 3.9% year-on-year in June, marking a reversal from May’s revised 2.3% growth, according to data from the Economic Development Board (EDB) on Friday (Jul 26). This figure was worse than the median forecast of a 0.1% contraction predicted by economists.
Excluding the volatile biomedical sector, output declined by 1.6%, a significant downturn compared to the 9.5% growth observed in May. The key electronics sector saw a notable 5.5% drop in production, reversing May’s strong 18.6% year-on-year growth. The decrease was largely attributed to a 9.4% decline in semiconductor production, despite gains in other segments.
Moody’s Analytics economist Denise Cheok noted that electronics production in Southeast Asia has not kept pace with the recovery seen in Northeast Asia, particularly in South Korea and Taiwan, where demand for high-end chips, especially for AI applications, has surged. In contrast, lower-end chips produced in Singapore have faced slower growth.
Biomedical manufacturing, which was the worst-performing sector, contracted 23.2% year-on-year in June, though this marked an improvement from May’s 43% decline. The downturn was driven by a 47.1% drop in pharmaceutical production, while medical technology output grew by 11.4% due to higher export demand.
Other manufacturing sectors showed mixed results: precision engineering declined by 3.2%, with a notable contraction in machinery and systems production. On a positive note, transport engineering saw a 10.3% increase, driven by strong growth in marine, offshore, and aerospace engineering.
Despite June’s weak performance, economists, including DBS’s Chua Han Teng, remain cautiously optimistic about a gradual recovery, particularly driven by electronics and external demand for tech products. However, growth in transport engineering is expected to moderate as travel demand returns to pre-pandemic levels.
