SINGAPORE'S manufacturing output grew 7.6 per cent year-on-year in November, beating economists' estimates of 4.2 per cent and outstripping October's 5.5 per cent figure, according to preliminary estimates from the Singapore Economic Development Board on Wednesday.
Yet, economists are cautious not to be too congratulatory. Mizuho Bank head of economics and strategy Vishnu Varathan noted that the November performance was boosted by biomedical outperformance exaggerated by a low year-ago base, as well as fairly steady month-to-month electronics output also "being flattered by a low base" from 2017.
Excluding the volatile biomedical manufacturing sector, output grew 5.3 per cent year-on-year.
On a seasonally adjusted month-on-month basis, output rose 2.8 per cent in November, pulled up by the biomedical sector - without which growth would have been flat.
Biomedical manufacturing was the biggest driver in November, with output up 18.5 per cent year-on-year. In particular, pharmaceuticals output was up 23.9 per cent, while medical technology output rose 6.6 per cent.
Transport engineering stayed strong, up 11.3 per cent year-on-year within all segments. The marine and offshore engineering segment saw the largest increase at 26.6 per cent.
OCBC head of treasury research and strategy Selena Ling saw this as reinforcing "the story that the industry has likely troughed and is gradually turning the corner". But with oil prices trending downward, the good performance in this cluster may not last, said SIM Global Education senior lecturer Tan Khay Boon.
Electronics turned around with 11.2 per cent growth, after two straight months of year-on-year decline. Of this unexpected boost, UOB senior economist Alvin Liew said: "We may have underestimated the temporary positive impact of the 90-day trade tariff ceasefire between the United States and China."
Contractions in the data storage and computer peripherals segments were more than made up for by output growth in semiconductors, infocomms and consumer electronics, and other electronic modules and components. Cumulatively, the electronics cluster's output is up 9.5 per cent year-on-year for the first 11 months of 2018, compared to the same period in 2017.
Mr Liew noted, however, that the planned additional tariffs have set the stage for another round of front-loading of imports before the Mar 1, 2019 deadline.
If the current performance is indeed due to front-loading, this translates to a weaker manufacturing growth outlook for 2019, he said. He projected industrial production to grow 2.5 per cent next year, down from a previous 3 per cent forecast, "on the back of a harsher payback after the front-loading activities".
Chemicals output also turned around in November after two months of contraction to grow 3.4 per cent, supported by the other chemicals and specialities segments. Production in petroleum and petrochemicals fell due to maintenance shutdowns.
Seeing declines in output were the general manufacturing and precision engineering clusters.
General manufacturing was down 0.8 per cent, dragged down by an 11 per cent decline in printing. It has been the weakest performing cluster year-to-date, up only 0.7 per cent for the first 11 months compared to the year-ago period.
Precision engineering output went into contraction, down 8.2 per cent. The machinery and systems segment fell 7.5 per cent, while the precision modules and components segment was down 9.2 per cent. Nonetheless, year-to-date output for the first 11 months was still up 5.6 per cent compared to the same period in 2017.
Mr Liew said UOB still expects an eventual slowdown in manufacturing, though that may be postponed into next year given the US-China truce. The bank's full-year manufacturing growth forecast for 2018 stands at 7.7 per cent, implying a December manufacturing growth forecast of 6.2 per cent year-on-year.
UOB's GDP growth forecast for 2018 is maintained at 3.4 per cent, though the uptick in October and November manufacturing may add a further upside.
Ms Ling noted that the December 2017 base of a 2.4 per cent decline "is not very challenging". However, she said the first quarter of 2019 may see "some sequential seasonal moderation in manufacturing momentum", adding that Q4 2018's theme of stronger-than-expected manufacturing growth may not carry over into 2019.
As for monetary policy implications, Mr Varathan said he does not expect any disruption to the likelihood of continued calibrated tightening.
"November's data neither distract from an underlying peaking and gradual downturn in manufacturing activity, nor does it give cause for alarm about an imminent seizure," he said. "Instead, it supports a gradualist approach to policy normalisation while US-China trade developments are dynamically assessed."