[SINGAPORE] Factory output gained 7.1 per cent on year in July, similar to June’s downward-revised figure and far exceeding estimates, data from the Economic Development Board showed on Tuesday (Aug 26).
While economists continue to expect a weaker performance in the second half of the year, some were more hopeful after the latest data was released.
In a Bloomberg poll, the median estimate by private-sector economists was a 0.9 per cent expansion.
DBS senior economist Chua Han Teng as well as UOB’s senior economist Alvin Liew and associate economist Jester Koh agreed that the industrial production (IP) print surprised on the upside.
Factory activity has sustained its expansion for the 13th consecutive month, noted Chua.
Excluding the volatile biomedical manufacturing cluster, output grew 9.4 per cent year on year, up from June’s revised 7.1 per cent rise.
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While both biomedical and non-biomedical segments contributed to growth, the contribution from pharmaceutical output receded in July, the UOB team said.
On a seasonally adjusted monthly basis, output marked an 8.2 per cent expansion, turning around from June’s 0.8 per cent contraction. Excluding biomedical manufacturing, output grew 7.1 per cent month on month in July, reversing from a 1.7 per cent contraction in the previous month.
DBS’ Chua remains cautious on the outlook for Singapore’s export-oriented manufacturing performance, despite July’s outperformance.
He noted the “highly uncertain and fragile global economic landscape that is threatened by the ongoing unpredictability of US tariffs”. He expects Singapore’s external demand to soften, dragged by still-high US tariffs globally, with higher US reciprocal tariffs (compared to the 90-day pause) kicking in from August.
Meanwhile, “sky-high” sectoral tariffs on semiconductors and pharmaceutical products still loom, he said, though he added that exemptions or a longer implementation timeline could mitigate the negative adjustment.
Chua also expects payback from earlier front-loading activity to weigh on manufacturing momentum.
While UOB’s duo still expects weakening in H2, they added: “The stronger-than-expected July IP outturn could mean a further pushback to the ‘payback’ timeline.”
This eventual “payback” could be more pronounced in the trade-related services – wholesale trade, transport & storage – rather than in manufacturing, they reiterated, adding that further drag in these sectors will likely stem from weaker demand due to the tariffs.
Maybank analysts Chua Hak Bin and Brian Lee said the robust start to the third quarter reinforces their view that “fears of a sharp second-half pullback are likely overstated”.
Output in July was the highest since September 2024, they noted.
“With Singapore facing the lowest (and unchanged) reciprocal tariff rate in Asia while most other US trading partners suffer tariff hikes in August, Singapore could benefit from diversion in export orders,” they said.
Meanwhile, many US trading partners in Asean and North-east Asia such as Japan and South Korea have secured relatively lower tariffs through trade deals, they noted, adding that this should support regional trade volumes and “limit the severity of any export slowdown in the second half”.
Performance by cluster
The lynchpin electronics cluster’s output jumped 13.1 per cent in July, up from 8.4 per cent in June. Within the cluster, growth was led by the infocomms and consumer electronics segment, which expanded 86.8 per cent with higher production of server-related products.
The semiconductors (9.6 per cent) and other electronic modules and components (1.9 per cent) segments also increased, while the computer peripherals and data storage segment (-4.2 per cent) declined.
Electronics remains a bright spot, benefitting from the artificial intelligence and data centre boom, said the Maybank team.
They believe that, with electronic products exempted from US tariffs, demand is likely to continue to grow in the second half.
Nearly all clusters saw year-on-year rises in production, with only the general manufacturing cluster posting a fall.
Besides electronics, transport engineering also recorded double-digit growth, at 15.8 per cent, extending June’s 13.1 per cent growth. The rise was led by the aerospace segment, which expanded 22.7 per cent, bolstered by higher production of aircraft parts and sustained maintenance, repair and overhaul jobs from commercial airlines.
The marine and offshore engineering segment grew 11.7 per cent, driven by increased activity in the shipyards. Conversely, the land segment declined 23.2 per cent.
Biomedical engineering (0.2 per cent), chemicals (4.2 per cent) and precision engineering (9.6 per cent) also grew.
In contrast, general manufacturing production shrank 9.7 per cent in July, narrowing from June’s 11.7 per cent year-on-year slide. All segments – printing; food, beverages and tobacco; and miscellaneous industries – saw output fall.
