Business

Manufacturing ends on high, experts optimistic

December factory output strongest since 2011, hinting at sector's recovery


Manufacturers ended 2016 on a high note with output expanding at its fastest rate in five years, raising expectations that growth momentum will continue amid a firmer global outlook.

Economists are pencilling in more optimistic forecasts for the Republic's economy this year on the back of the latest data, and also expect last year's growth figures to be revised upwards.

Factory output surged 21.3 per cent last month over the same month a year earlier, double the 10.4 per cent growth tipped by economists and the strongest showing since December 2011.

Manufacturing, which makes up about one-fifth of the economy, has been stuck in a protracted cyclical downturn amid lacklustre global growth.

But the sector appears to be staging a gradual recovery with more upbeat data out in recent months.

December's robust performance was due largely to spikes in both electronic and biomedical output, the two largest components of manufacturing.

Biomedical grew 44.9 per cent year-on-year last month, lifted by pharmaceuticals and medical technology production.

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If the volatile biomed cluster is excluded, overall manufacturing output still grew a robust 16.1 per cent in December.

Electronics manufacturing drove much of that growth.

The cluster, which contributes a third of Singapore's manufacturing output, expanded 49.4 per cent last month over the same month in 2015, due largely to semiconductor production, which surged 94 per cent.

Other manufacturing clusters, including precision engineering and chemicals, also grew last month, but transport engineering remained weak.

Citi economist Kit Wei Zheng said the numbers confirm Singapore "has not been left out of the global tech restocking cycle".

This implies fourth-quarter economic growth - and growth for the whole of 2016 - likely came in stronger than estimated, he added.

DBS Bank economist Irvin Seah said prospects are finally looking brighter this year.

He attributed this to: stronger consumption growth in the US driving demand for electronics and biomed output; a smaller drag from the oil and gas industry as crude prices recover; and a more stable economic outlook for China.

Still, Mr Kit warned that recovery remains fragile - oil and gas-related transport engineering is still in contraction, while tourism and other domestically oriented sectors such as retail sales continue to struggle.

EconomySingaporemauricio pochettino