Tuesday, July 27, 2010

Biomed puts brake on June output growth

Industrial production records first fall in 7 months on sharp slowdown in biomed

(SINGAPORE) June's factory output fell short of expectations for the first time this year, as a slowdown in pharmaceutical output put the brakes on manufacturing's acceleration.

Industrial production last month rose 26.1 per cent from a year ago, way under consensus expectations for 36.7 per cent growth. Factories also produced 23.4 per cent less than they had in May - the first sequential, seasonally-adjusted fall in seven months.

'The drop is very technically driven by the biomedical cluster, a segment that has provided significant impetus to growth since the start of this year,' said RBS's Singapore economist Lim Su Sian.

Biomedical output's year-on-year growth slowed to 29.8 per cent as pharmaceutical plants produced 30.8 per cent more than they had last June. This was a sharp slowdown from growth in excess of 100 per cent the month before, and June's biomed output was less than half that recorded in May.

Excluding biomedical manufacturing, overall production grew 24.8 per cent from last June but fell 1.8 per cent from May, data released by the Economic Development Board yesterday shows. Biomedical output accounts for a fifth of Singapore's value-added, the second largest industry share after electronics' 30 per cent.

Growth in the latter sector slowed slightly, but was still a robust 46.8 per cent year-on-year, as semiconductors output grew 74.9 per cent thanks to strong demand for cellphones, personal computers and consumer electronic products.

The other sectors - precision engineering (33 per cent), general manufacturing (11 per cent ) and chemicals (7 per cent growth) - all saw their pace of growth slow by several percentage points too.

And transport engineering's output continued its year-on-year fall due to fewer ship conversion and repair jobs in the ship yards, which offset growth in the land and aerospace segments.

With six months of data now in, EDB said that the manufacturing economy expanded 41.6 per cent in the first half of 2010 from a year ago.

As signs of cooling off surface beneath the positive headline numbers, the second-half of 2010's 'tale of two halves' appears to have begun before the halfway mark, OCBC economist Selena Ling said.

'Are the headwinds coming from US and Europe, or China's slowing? It's not too clear at this stage, but the NODX numbers should show which countries' demand is facing growing resistance,' she said.

June's industrial production figures also back up other signs of slowdown like rising inventories seen in June's PMI and waning export momentum, said Citi economist Kit Wei Zheng.

HSBC economist Kim Song-yi thinks that though manufacturing will ease in coming months, the stretched labour market and wage pressures mean a tightening of monetary policy to control inflation risks is still a possibility.

Source: Business Times, 27 Jul 2010

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