Key Points:
- Singapore’s manufacturing output rose by 21.3% year-on-year (y/y) in December 2016, driven by buoyant output in the electronics and biomedical manufacturing sectors.
- On a seasonally-adjusted basis, manufacturing output was up by 6.4% month-on-month (m/m).
- Electronics sector output rose by 49.4% y/y, boosted by a 94% increase in semiconductors output y/y. For the 2016 calendar year, electronics output was up 15.9% y/y. As the electronics sector accounts for 27.4% of overall manufacturing output, this buoyant growth in electronics output has been a key driver of the resurgent performance of Singapore’s manufacturing sector in Q4 2016.
- Biomedical manufacturing also performed strongly in December, with output rising by 44.9% y/y, mainly reflecting a 53.8% rise in pharmaceuticals manufacturing. For calendar 2016, biomedical manufacturing output rose by 13.6% y/y.
- The chemicals sector also showed moderate output growth of 4.1% y/y in December, helped by a 18.4% y/y rise in petrochemicals output.
- However, the very strong monthly performance of Singapore’s manufacturing sector continued to be tarnished by the weak performance of the transport engineering sector, which recorded a 10.5% y/y decline in output in December, mainly due to the ongoing recessionary conditions in the marine and offshore engineering sector, which had a 26.1% decline in output in December and a 30.1% fall for calendar 2016.
Outlook:
Singapore’s manufacturing sector has seen a considerable recovery during the second half of 2016, helped by a resurgent electronics sector and strong growth in biomedical manufacturing output. The strong performance of Singapore’s electronics sector has been underpinned by buoyant growth in semiconductors output, due to strong growth in global demand, which is expected to continue into the first half of 2017. Global semiconductors sales were strong in Q4 2016, with the Semiconductor Industry Association (SIA) announcing that global semiconductors sales rose 7.4% y/y in November, with a solid start expected for 2017. Due to the importance of semiconductors output for Singapore’s manufacturing sector, this has been a key factor supporting robust manufacturing growth. The SIA figures showed that strong growth of around 16% y/y in the Chinese semiconductors market was leading the upturn in global semiconductors demand. According to Global Electronics PMI data from IHS Markit, the seasonally-adjusted Global Electronics PMI for December reached its highest since June 2010, driven by sharper expansions in output, new orders and employment, which is supportive for the outlook for Singapore’s electronics manufacturing sector in the first half of 2017.
The outlook for Singapore’s manufacturing sector in the near-term is expected to be helped by the global and APAC economic outlook for 2017. IHS Global Insight forecasts that the Asia Pacific region will remain the fastest-growing region of the global economy, helped by continued rapid growth in the major Asian emerging markets of China, India and ASEAN. APAC GDP growth is forecast to be 4.6% in 2017, similar to the 4.7% growth rate estimated for 2016 IHS Global Insight forecasts that world GDP growth will improve from 2.4% in 2016 to 2.8% in 2017, helped by stronger US GDP growth, which will provide some positive impact effects to Singapore’s exports and GDP growth.
The US economy, which remains an important market for Singapore’s exports, is forecast to strengthen in 2017, supported by the incoming Trump Administration’s plans for deep corporate tax cuts and a boost to infrastructure spending. However, there are still significant downside risks to the APAC outlook in 2017. Key downside risks to the outlook are from the impact of further US Fed rate hikes in 2017 on Asian financial and currency markets, as well as the significant economic and financial imbalances that continue to impact upon the Chinese economy. Adding to downside risks for 2017 is the potential impact of escalating US-China trade tensions on regional trade, which could have negative transmission effects through the Asian manufacturing supply chain.