M-o-m output figures offer more realistic view

Economists say they give a better picture than July's year-on-year growth of 2.迷你倉7%[SINGAPORE] The Republic's manufacturing sector may have out-performed economists' expectations in July - expanding 2.7 per cent year-on-year, thanks to a continued improvement in electronics output - but don't let the better-than-forecast numbers fool you.Most economists BT spoke to say that contracting sequential numbers betray a far more sombre picture, ultimately indicating that manufacturing growth will take a flatter, more sidelong trajectory in the months ahead."Month-on-month, manufacturing output isn't actually that strong. It's important to remember that things look good year-on-year because we're comparing it to a relatively low base," said Bank of America Merrill Lynch economist Chua Hak Bin, who added that taking into account sequential figures, things "still look a bit fragile".DBS economist Irvin Seah agreed: "It all depends on how you want to skin this cat. Year-on-year, it's true that we're seeing an improvement, but month-on-month, indicators are pointing towards some easing in production."After seasonal adjustments, overall factory output declined 1.9 per cent month-on-month in July. This marked a second consecutive month of sequential contraction; industrial production fell 2 per cent in June.In terms of absolute levels of output, both the electronics and biomedical sectors - which together account for over half of Singapore's manufacturing economy - saw lower levels of production in July than in June this year."I think this is a more realistic reflection of what's really happening now, rather than the year-on-year number. It really reinforces the view that there are still external headwinds, so there's a very good chance to see pull-back in (factory output) in Q3," said Mr Seah.He also noted that emerging market risks from Singapore's key trading partners - such as Malaysia, Indonesia and India - could have 儲存倉 "significant impact" on Singapore.Citi economists Kit Wei Zheng and Brian Tan, and Daniel Wilson of ANZ, also said that they expect a pull-back in Q3 industrial production, before a stabilisation or even a mild pick-up in Q4.On a year-on-year basis, the Republic's manufacturing sector far exceeded economists' forecasts, as higher export demand for semiconductors and computer peripherals - which grew 2.3 per cent and 14.7 per cent respectively - helped to offset a 1.3 per cent contraction in biomedical output due to weak pharmaceuticals numbers.Economists polled by Reuters had been expecting industrial production to edge up 1.2 per cent higher in July from a year earlier, citing industry surveys (such as the purchasing managers' index) that show a continued rise in manufacturing activity.Excluding biomedical manufacturing, Singapore's output grew 3.6 per cent, the Economic Development Board (EDB) said yesterday.The transport engineering cluster's output increased 13.9 per cent year-on-year in July, thanks to a strong gain of 19 per cent in its marine & offshore engineering segment. This was a result of higher contributions from rig building and ship conversion projects."This is not sustainable going forward," said Dr Chua. "It completely depends on when deliveries for ships and rigs happen, and that comes and goes. So I don't think we can take that one data point and conclude that exports are set for a firmer recovery."Indeed, year-on-year growth in factory output was not broad-based. Apart from the biomedical sector, the chemicals and precision engineering clusters also saw declines of 0.3 per cent and 7.4 per cent respectively.While Mr Seah said that he is "not ruling out" the possibility of a month-on-month expansion in August - driven perhaps by an upswing in the volatile biomedical sector - he said: "Over a long-term horizon, I think we're going to see industrial production move sideways, not northward."迷你倉沙田