Bookmark & Share
SINGAPORE'S manufacturing output unexpectedly surged last month, registering its biggest gain since March last year on the back of booming pharmaceutical production.
The Economic Development Board (EDB) yesterday said manufacturing output, which makes up a quarter of Singapore's economy, rose 12.4 per cent last month compared to July last year.
The big rise contrasts with the consensus expectation of a 1 per cent drop over this period, following the 9 per cent year-on-year decline seen in June.
The pharmaceuticals sector was the key driver of the growth with a 139.2 per cent jump in output. Excluding biomedical manufacturing - the segment that includes pharmaceuticals - output would have shrunk 7.4 per cent over the period.
Manufacturing output as a whole soared 23 per cent as compared to June, extending growth into a third straight month. While the spike in pharmaceuticals could be partly down to rising demand caused by the ongoing global Influenza A (H1N1) pandemic, economists say the upbeat numbers provide further evidence of an economic recovery and that this could signal better third-quarter gross domestic product (GDP) data.
HSBC economist Robert Prior-Wandesforde said: 'It looks increasingly as though the third quarter will see a very powerful expansion, while the fundamentals suggest the recovery will continue well into next year.' He expects average GDP growth for Singapore of more than 5 per cent next year.
The EDB figures show that the decline in the electronics sector has eased considerably, with output contracting just 5.6 per cent from the same period last year. This compares with a 19 per cent shrinkage in June and a 43 per cent contraction in January.
'It looks increasingly likely that the electronics cycle is finally turning,' said Mr Prior-Wandesforde. 'This doesn't just bode well for Singapore but most of the region, where the tech sector is an important driver of growth. It also means that as and when pharmaceuticals drop back again, there is likely to be some support from elsewhere.'
Citigroup economist Kit Wei Zheng said other key service indicators, including tourist arrivals, suggested a strong start to the third quarter, which could bode well for positive revisions to full-year GDP forecast later this year.
CIMB-GK economist Song Seng Wun said last month's reading indicated a very positive start for the third quarter.
Even allowing for a pullback in drug output this month, advance third-quarter GDP data may show manufacturing expanding by 7 to 9 per cent year-on-year, compared to a 2.3 per cent contraction in the second quarter, he said. 'If so, this would be the first time Singapore's manufacturing sector has grown year-on-year, after five quarters of decline.'
But not all is rosy within manufacturing. Some industry segments, such as precision engineering, registered double-digit declines.
'A more sustained recovery for manufacturing here will require a more broad-based return of global consumer demand for the rest of the industry clusters and especially for electronics,' said Standard Chartered economist Alvin Liew.
Search Property News
