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INDUSTRIAL production has slipped back into the red, shrinking 9.3 per cent in June after two months of growth, as pharmaceutical output slowed significantly.
showed on Friday.
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The year-on-year fall was greater than the average 6.4 per cent drop economists had expected, but none are too negative on the manufacturing economy's outlook, as other industrial segments continued to improve in June.
Barclays Capital economist Leong Wai Ho said the key reason for the overall drop in production in June was pharmaceutical output. Growth in this segment slowed from 139 per cent year on year in May to 14 per cent in June, compounding the effects of 2008's high base.
Excluding the volatile biomedical manufacturing component, June's factory output fell 14.6 per cent year on year, moderating from May's 17.6 per cent fall, the Economic Development Board said in its monthly report yesterday.
There was some growth momentum. After adjusting for seasonal factors, overall factory output in June fell 9.2 per cent from May, but rose 0.6 per cent excluding biomedicals.
For electronics, a sector hit hard by weak global demand, the pace of contraction slowed in June, with output down 20.4 per cent year on year, compared with May's 22.9 per cent drop. In particular, computer peripherals and data storage devices showed improvement.
Most of the other manufacturing sectors - chemicals, precision engineering and general manufacturing - also posted smaller declines, but marine and offshore engineering output fell more sharply.
Citi economist Kit Wei Zheng estimates that excluding biomedicals and electronics, industrial production fell 10 per cent year on year in June, moderating from an 11.7 per cent decline in May.
'It's getting harder to get too bearish on manufacturing activity in Singapore in H2 09,' said Mr Leong. He cited regional purchasing managers index (PMI) readings and Singapore's own positive electronics PMI as pointing to 'a more lasting bounce in industrial activity in Singapore in the months of Q3'.
More support for Singapore's manufacturing economy will likely come from the opening of three vaccine plants and Shell's US$3 billion petrochemical cracker in Q4, Mr Leong said.
Last week, the government narrowed its 2009 growth forecast to a contraction of 4 to 6 per cent, from minus 6 to 9 per cent previously, as advance estimates of Q2's GDP pointed to 20.4 per cent quarter-on-quarter growth. A downward revision of that figure is now expected, given June's manufacturing results.
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