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Nikkei Markets

Singapore manufacturing gets unexpected boost from drugs

Electronics contracted at slower pace in September

Manufacturing accounts for about one-fifth of Singapore's GDP.   © Reuters

SINGAPORE (Nikkei Markets) -- Total output from the city-state's manufacturers rose unexpectedly last month, signalling a possible upward revision to third-quarter growth and easing concerns about the overall economy.

Although the showing was driven by a surge in pharmaceuticals and aircraft repair, the slump in electronics also slowed.

According to the Economic Development Board, production at factories and shipyards rose 0.1% in September from a year ago, turning around from August's drop of 6.4%. The figure beat the consensus forecast for a 4.1% decline.

On a seasonally adjusted month-on-month basis, manufacturing output increased 3.7%, partially reversing the 7.3% decline in August.

Singapore's economy has slowed sharply over the past year, hurt by disruptions caused by the trade war between the U.S. and China as well as weakness in the global electronics industry. According to advance estimates released earlier this month, the city-state's gross domestic product grew by just 0.1% in the third quarter from a year ago as manufacturing contracted 3.5%.

The growth figure is now likely to be revised higher following the latest factory output figures and upward revisions to production data for July and August, said Selena Ling, Oversea-Chinese Banking Corp's head of treasury research and strategy.

Manufacturing accounts for about one-fifth of Singapore's GDP.

Ling also said there was "a glimmer of light" for the electronics sector. September's 9.6% contraction in electronics output was far milder than the 25% in August.

While semiconductors, computer peripherals and other electronics modules declined, "there was a sharp pickup in output momentum for the info-communications and consumer electronics segment while the data storage segment sustained its fourth month of expansion," she said.

Pharmaceuticals climbed 26.2% on the back of higher production of the active ingredients used in various medications, while aerospace engineering grew 39.0% due to an increase in repair and maintenance projects for commercial airlines, EDB said.

As for other key sectors, precision engineering expanded by 4% in September, following a 13.6% fall the month before, while output of chemicals decreased 3.9% on-year.

The marine and offshore engineering segment fell 27.3% on account of lower levels of offshore and shipbuilding and repairing activities, EDB added.

In a TV interview with Bloomberg on Thursday, Ravi Menon, managing director of the Monetary Authority of Singapore, said the current cycle "should be bottoming out toward the end of the year and into next year," based on the assumption that the slump will be largely contained in the trade and manufacturing industries.

--Kevin Lim

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