A pick-up in the production of tech components and drugs lifted Singapore's factory output last month, but economists held back from calling it a real recovery in the manufacturing sector.
Factory output overall was 4.2 per cent higher in August than in the same month last year, the Economic Development Board (EDB) said yesterday. This was slightly lower than market forecasts but the best year-on-year reading in four months.
However, output slid 0.2 per cent in August from July, after seasonal adjustments.
Economists explained that much of the rise in manufacturing output from a year ago was due to a low base last year, especially for electronics, the largest cluster in the sector.
Electronics production, which accounts for about a third of overall output, grew 7.2 per cent from last year - its first rise since March, noted OCBC economist Barnabas Gan.
But CIMB economist Song Seng Wun flagged a real possibility that the tech rebound will be "short-lived", likely to be halted as soon as this month by a high base last September.
Biomedical output, the second-biggest segment in manufacturing, rose 9.7 per cent from the previous year, the EDB said.
This was driven by a 7.5 per cent rise in drug production and a 20.6 per cent jump in medical technology products.
Compared with July, however, output for both the electronics and biomedical clusters fell, mirroring the overall trend.
Other segments reported smaller changes last month. Chemicals and precision engineering manufacturers produced more, by 2.3 per cent and 1.9 per cent respectively, from a year earlier.
But the general manufacturing and transport engineering clusters cranked out 0.2 per cent and 0.8 per cent less respectively.
Yesterday's data did little to change expectations for "slow and low growth" in manufacturing for the rest of the year, as ANZ economists Daniel Wilson and Glenn Maguire put it.
While the sector should perform better in the third quarter, "any recovery needs to be put into perspective as it is coming from the sizeable step down in the second quarter", said Citi economist Kit Wei Zheng.
He noted that manufacturing levels in July and August are still about 1 per cent below the monthly average in the first quarter.
Bank of America Merrill Lynch economist Chua Hak Bin tips factory output to grow about 3 per cent for the July to September period over the previous year, leading to broader economic growth of 2.4 per cent for the quarter.
Some economists also see silver linings in the sector in the coming months.
UOB economists Francis Tan and Jimmy Koh, for instance, are upbeat on clusters that are "experiencing strong external demand for their highly specialised outputs", such as biomedical and chemical manufacturing.
This article was first published on Sep 27, 2014.
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