February factory output beats economists’ expectations

Manufacturing growth for February beats expectations, with electronics again the star performer

Singapore's factory output continued its winning streak last month, beating expectations from economists despite concerns about the Chinese New Year effect.

Industrial production grew 8.9 per cent last month compared with the same month last year, faster than the 4.2 per cent expected by economists in a Bloomberg poll. Excluding biomedical manufacturing, output grew 9.1 per cent.

February's number lags behind January's stellar expansion of 16.9 per cent, revised down from an earlier 17.9 per cent.

On a seasonally adjusted basis, however, manufacturing output dipped 0.5 per cent last month from January.

With biomedical manufacturing stripped out, output still managed to grow 1.3 per cent from January, according to Economic Development Board data yesterday.

Electronics was again the star performer, expanding 17.4 per cent last month from a year earlier, thanks to the booming semiconductors segment, which posted a growth of 26.7 per cent.

The volatile biomedical cluster expanded 8.4 per cent, on the back of increased output from the pharmaceuticals segment due to higher production in biological products.

Chemicals output rose 8 per cent, led by petrochemicals, which grew 17 per cent on the back of more production capacity.

Transport engineering went up 5.4 per cent year-on-year, attributed mostly to the aerospace segment, which grew 57.2 per cent as a result of higher volumes of repair and maintenance work from commercial airlines.

Precision engineering - which is closely linked to electronics - grew at a pace of 3.4 per cent.

While the machinery and systems sector grew 6.6 per cent, other segments such as precision modules and components declined, partly because of the Chinese New Year holiday.

General manufacturing fared the worst, with output declining by 6.3 per cent year-on-year.

This, again, was due to fewer production days in February as a result of the holiday. The festival was in February this year and in January last year, which muddied the data.

Despite talk of an impending trade war, economists do not see a negative impact on Singapore for now.

"The US-China trade spat has not impacted Singapore's manufacturing growth as yet," said Maybank economists Chua Hak Bin and Lee Ju Ye.

DBS economist Irvin Seah suggested Singapore could benefit if there is some degree of trade diversion.

He said if US importers find it too expensive to source from China, they could switch their procurement to places such as Taiwan, South Korea, Vietnam, Thailand and Malaysia.

"And countries such as Singapore, with existing trade agreements with the US, whereby the trade terms are more favourable, could see more advantages," he said.

Economists believe the relatively firm manufacturing data will prompt the Monetary Authority of Singapore to tighten the exchange rate policy at its meeting next month.