SINGAPORE (Nikkei Markets) -- Output from Singapore's factories grew at a better-than-expected pace in October as shipyard activity surged for the second consecutive month.
However, the outlook remains muted due to the continued weakness in electronics production that has affected many countries in the region.
"We think the rebound is short-lived and does not represent a turn in the manufacturing down-cycle," Maybank Kim Eng said in a note, adding that purchasing managers' indexes in Asia and Europe were falling "as the global tech cycle fades and the U.S.-China trade war disrupts supply chains."
Dutch bank ING said in a commentary earlier on Monday that electronics exports from South Korea are still growing on an annual basis, but those from Japan, Singapore, and Thailand have been either flat or in contractionary mode, signalling a downturn in the industry.
According to data from the Singapore Economic Development Board, Singapore's manufacturing output rose 4.3% in October from a year ago.
The rise was powered by a 52.2% jump in the marine and offshore engineering segment due to the low base last year as well as a higher level of work done on offshore projects.
On a month-on-month seasonally adjusted basis, manufacturing expanded by 2.0%, reversing three months of sequential decline and beating the consensus estimate of 1.6% growth of economists polled by Refinitiv.
Singapore's large offshore and marine industry is beginning to recover after three years in the doldrums due to the rebound in global oil prices. At its recent results briefing for the quarter ended September, Keppel Corp., the world's largest builder of offshore rigs, reported an increase in orders and said it expected more retrofitting projects as ship owners rush to meet a 2020 deadline to reduce sulphur emissions.
Sembcorp Marine, the city-state's other major offshore player, also said sentiment has improved although it warned of a lag before the improved outlook translates into new orders.
Among Singapore's other major manufacturing clusters, electronics fell 2.7% in October from a year ago, declining for a second month due to weakness in computer peripherals and data storage devices. Chemicals declined by 1.0% while pharmaceuticals expanded 15.8%.
Manufacturing accounts for about one-fifth of Singapore's gross domestic product.
The factory data for October comes just days after the Ministry of Trade and Industry said economic growth slowed to 2.2% for the three months ended September from the same period a year ago, coming in below consensus.
While manufacturing activity may moderate slightly towards the year-end, Oversea-Chinese Banking Corp., the city-state's second largest lender, does not expect a significant drop off in momentum, said Selena Ling, the bank's head of treasury research and strategy.
Maybank Kim Eng economist Lee Ju Ye was less optimistic about the outlook, noting the sharp drop in oil prices over the past month.
"We think the down-cycle will be more evident in the first quarter of 2019, with some risk that industrial production may contract for a few months," she said.