Electronics manufacturing, up 49.1%, is economy's brightest spot

This article is more than 12 months old

Factory output last month up 21% from a year ago, with all segments expanding

Singapore manufacturers started the second half of the year on a strong footing, laying to rest worries that the pace of growth in the sector might be slowing.

Factory output surged 21 per cent last month from the same month last year, boosted by robust electronics manufacturing - now the brightest spot in the Singapore economy.

This blew past economist expectations of a 12.9 per cent rise and was also the sector's strongest pace of growth so far this year.

Manufacturing makes up one-fifth of the economy and has been a key growth driver this year, even though the sector has been shedding jobs.

It is being lifted by strong global demand for semiconductors and related equipment.

All manufacturing segments expanded last month - but electronics was once again the top performer, with output soaring 49.1 per cent last month from the same period last year - according to Economic Development Board data released yesterday.

The precision engineering cluster - another beneficiary of the rise in global electronics demand - grew 21.8 per cent.

The traditionally volatile biomedical manufacturing cluster's output grew 5 per cent, largely led by the medical technology segment, which was up 17.7 per cent.

Leaving aside biomedical manufacturing, overall factory output would have grown 24.9 per cent. The general manufacturing and chemicals segments also expanded.

Obviously, the previous month's expansion in the transport engineering cluster wasn't a fluke. DBS senior economist Irvin Seah

Even transport engineering - long stuck in the doldrums as low oil prices hit the marine and offshore segment - grew 2.3 per cent, thanks to better showings in land transport and aerospace.

"Obviously, the previous month's expansion in the transport engineering cluster wasn't a fluke. The worst is probably behind for this industry," said DBS senior economist Irvin Seah.


He added that manufacturing as a whole "appears to be getting a second wind" despite earlier concerns that growth might taper off.

Other economists are still cautious about the outlook, however.

UOB economist Francis Tan said manufacturing growth "remains uneven and overly reliant on the cyclical increase in the demand for semiconductors and its surrounding services".

"We believe the double-digit growth for semiconductor production may slow into the single digits... due to base effects and slower investment expected in China," he added.

In addition, the labour market has yet to pick up in line with stronger growth.

The manufacturing sector saw employment fall by 2,500 in the April to June period - the 11th consecutive quarter of decline.

CEI Contract Manufacturing managing director Tan Ka Huat said semiconductors are booming - the prices of some key components are rising, while lead times have also increased because of strong demand.

Oil and gas, however, "continues to be weak and shows no sign of picking up".

"My customers don't see light even next year," he added.