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Mon, October 26, 2020 – 1:00 pm
UPDATED Mon, Oct 26, 2020 – 4:38 pm
SINGAPORE’s factory output jumped 24.2 percent year-on-year in September, driven by a near doubling in output from the volatile biomedical group, figures from Singapore’s Economic Development Board showed on Monday.
This far exceeded economists’ expectations of 2.5 percent growth, and was higher than August’s upwardly revised figure of 15.4 percent growth.
The surprisingly strong performance of industrial production in September is expected to cushion the contraction in gross domestic product (GDP) in the third quarter. The September figure means that industrial production increased 10 percent year-on-year in the third quarter, recovering from the 0.8 percent decline in the second quarter and beating the anticipated estimate of 2 percent.
Barclays economist Brian Tan expects overall third quarter GDP growth to be -5.5%, above the anticipated estimate of -7%, while Maybank economists Kim Eng, Chua Hak Bin and Lee Ju Ye, put it at -5.4%.
If biomedical manufacturing is excluded, production was still increasing 8.5 percent year-on-year. On a seasonally adjusted monthly basis, industrial production increased 10.1 percent in September, but fell 1.6 percent excluding biomedical manufacturing.
“Manufacturing is exceptionally resilient in this pandemic recession as supply chains and trade flows faced only temporary disruptions,” said Maybank economists, noting that Singapore is benefiting from “pandemic-induced demand” for semiconductors, pharmaceuticals and medical technology.
The surprising growth in September was driven by 89.8 percent growth in biomedical manufacturing production, led by a 113.6 percent increase in pharmaceutical production. The medical technology segment also grew 15 percent, with higher export demand for medical instruments.
So far this year, biomedical manufacturing continues to be the best performing group, 26.6% more than in the same period of the previous year.
The electronics group continued to perform well, with an increase of 30.1% in September. This was led by 37.4 percent growth in the semiconductor segment, supported by demand for cloud services, data centers and the 5G market. During the first nine months of the year, electronics production increased 7 percent over the prior year period.
The chemicals group posted a marginal 0.4 percent increase in production, with increases in the specialty (25.2 percent) and other chemicals (6.7 percent) segments barely outpacing contractions in petrochemicals (-7.3 percent) and oil (-25.7 percent). percent) segments, due to plant maintenance shutdowns. So far this year, the production of chemical products remains below that of the previous year, falling 3.5 percent.
The remaining three groups experienced year-on-year declines in September.
Precision-engineered production saw its first decline since May, 1.5 percent, with declines in all segments. Still, so far this year, the cluster’s production has increased 10 percent over the prior year period.
Overall manufacturing output continued to experience declines in all segments, with the group’s output falling 8 percent, although this marked a slowdown from the previous two months of contraction. So far this year, the group’s production is down 12.6 percent.
Transportation engineering remains the worst performer so far this year, falling 35.8 percent in September. Although the land segment grew 35.1%, this was offset by declines in the marine and offshore engineering (-40.9%) and aerospace (-44%) segments, and new orders remained low due to the weakness of the global oil and gas market. and Covid-19 travel restrictions respectively. Transportation engineering production fell 24 percent in the first nine months of the year, compared to the prior year period.
Looking ahead, Maybank economists believe the manufacturing sector is likely to continue to perform better in the fourth quarter, driven by both semiconductors and biomedical production.
“While the pharmaceutical industry tends to be volatile, it is likely to post another strong performance in the fourth quarter given last year’s low base,” they added.
Economists have raised their full-year GDP growth forecast to -5.7 percent, from -6 percent previously, while maintaining their 2021 forecast of 4 percent growth. The revised forecast for 2020 “points to a further improvement in fourth-quarter GDP to -4 percent as services and construction gradually normalize,” they said.
Tan pointed to the upside risks to Barclays’ forecast of a 6 percent decline in gross domestic product for the full year in 2020, followed by 4 percent growth in 2021.
“The recession remains largely domestic in nature, supporting the view that fiscal policy should remain the most effective response, and there are signs of a gradual recovery,” he added.
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