Another double-digit jump in electronics output boosted Singapore's manufacturing performance in October, and economists expect the sector to continue to power industrial growth in the months ahead.
Even so, the 8 per cent rise in industrial production fell short of market expectations, dragged down by a 2.3 per cent contraction in the biomedical manufacturing cluster.
Excluding the volatile biomedical sector - which shrank on a 6.9 per cent drop in pharmaceuticals output - industrial production would have grown an even stronger 10.4 per cent year-on-year.
The 17 economists polled by Bloomberg before the Singapore Economic Development Board (EDB) released the numbers yesterday had a median forecast of 9.3 per cent growth.
The electronics sector continued to build on September's robust showing, rising from 20 per cent year-on-year growth that month to 22.8 per cent in October. This was largely a result of most segments expanding amid improved demand.
Said Credit Suisse economist Robert Prior-Wandesforde: "This is the strongest increase since November 2010, suggesting the sector is enjoying something of a renaissance after a couple of years that can only be described as utterly miserable."
Citi economist Kit Wei Zheng noted that the pick-up in electronics industrial production was in line with more upbeat global leading indicators of electronics demand.
In particular, the semiconductor segment - which accounts for one-fifth of all manufacturing output - expanded 20.3 per cent in October.
But economists from UOB and CIMB told BT that the climb in electronics output stemmed largely from base effects.
Said UOB's Francis Tan: "I think we more or less expected this (year-on-year surge in electronics output), because it's due to the low base seen this time last year, so it's not a stellar result actually. (But) electronics is certainly ticking upwards and on a recovery trend - it's just that the trajectory is slower with a gently rising slope."
Added CIMB's Song Seng Wun: "The base effect inevitably exaggerates the extent of the recovery, but I think the data still points to clear signs of improvement (in electronics). We can quibble about the magnitude (of such a recovery), but the direction is there, and that's important."
Both economists expect the electronics sector to continue to post double-digit increases in output in the coming months - lifting overall industrial production growth as a result - mainly because of a low base recorded in the latter part of 2012 and the beginning of this year.
The transport and engineering sector also gave a leg-up to October's numbers, expanding 8.9 per cent from a year ago. Supported by higher contributions from rig building projects, the marine & offshore engineering segment expanded 17.8 per cent. In contrast, the land and aerospace segments declined 3.5 per cent and 4.1 per cent, respectively.
Output of the precision engineering cluster grew 5 per cent from a year ago, buoyed by higher output in the machinery & systems segment. Output of the remaining clusters - chemicals, general manufacturing and biomedical manufacturing - fell a respective 0.9 per cent, 1.6 per cent, and 2.3 per cent in October compared to a year ago.
Said OCBC economist Selena Ling: "This data set confirmed that the biomedical cluster is currently undergoing a soft patch, but the electronics recovery theme is intact. (The growth in manufacturing output) should continue to pick up momentum in 2014 as the global economy, particularly the G3, stages a stronger recovery.
"We are looking for Singapore's manufacturing growth to more than double from our forecast of 1.4 per cent year-on-year in 2013 to 3.7 per cent year-on-year in 2014," said Ms Ling.
EDB said that after adjusting for seasonal factors, industrial production was unchanged month-on-month in October. Excluding biomedical manufacturing, output would have grown 0.2 per cent.