Sep 26, 2016 - SEMI Book-to-Bill ratio. The strong electronics ... Over in the U.S., telcos such as T-Mobile and Sprint
Francis Tan
[email protected] Global Economics & Markets Research Email:
[email protected] URL: www.uob.com.sg/research Monday, 26 September 2016
Flash Notes
Singapore: No Growth In Manufacturing For August As Pharma Falters For The 3rd Month
Singapore’s Industrial Production (IP) for August rose only 0.1% y/y (0.0% m/m SA), below market expectations of a 0.5% y/y (+1.8% m/m SA) gain. However, the performance was still better than July’s contraction of 3.5% y/y (-3.9% m/m SA). Again, for the third month in a row, the key reason for the weak overall manufacturing activity was due to the contraction (-8.4% y/y) in the output of biomedical manufacturing. Excluding that cluster, IP expanded 2.3% y/y (+1.5% m/m SA).
The biomedical manufacturing cluster had contracted for three consecutive months and fell 8.4% y/y in August. The lower production of active pharmaceutical ingredients and biological products had caused a 14.1% y/y decline in pharma output. That had offset a 12.1% y/y expansion in the medical technology segment.
Weaknesses were also seen in the general manufacturing (-1.6% y/y) cluster, as well as the transport engineering cluster (-16.8% y/y). In particular, the marine & offshore engineering segment remained weak and declined 31.4% y/y and had offset gains in the land transport (+11.4% y/y) and aerospace (+4.8% y/y) segments. Since the current period of y/y contraction that started in June 2014, when global oil prices started falling, the transport engineering cluster had been contracting for 24 out of the 27 months.
On a more positive note, gains were seen in the electronics (+10.8% y/y), chemicals (+1.8% y/y), and precision engineering (+11.6% y/y) clusters in the month of August. More specifically, the output of semiconductors grew 19.7% y/y (from 34.4% y/y in July), and registered the 6th month of double-digit growth, and in line with the nine consecutive months of expansion in the US SEMI Book-to-Bill ratio. The strong electronics output coincided with the better-than-expected August export orders in Taiwan that was released last week, boosted by electronics exports. Over in the U.S., telcos such as T-Mobile and Sprint Corp reported that they had received almost 4 times as many orders for the iPhone 7 compared to previous models and this will likely boost the demand for semiconductors in the months ahead.
However optimistic the electronics cluster may be, it is only 27.4% of total manufacturing activities. Concerns on the still-weak exports conditions, particular the uncertainty evolving Brexit and its impact on Singapore’s exports to the EU, will mar the prospects on other manufacturing clusters (more specifically for a Euro-zone dependent biomedical manufacturing cluster) . Moreover, the transport engineering cluster still remains in the doldrums. We maintain our 2016 industrial production growth forecast 1.0%. This implies a 3.0% y/y growth in the remaining 4 months till the end of 2016.
Flash Notes Monday, 26 September 2016
1 Page
Weights (2015)
Jun-16
27.4
19.1
16.5
10.8
8.7
17.0
39.1
34.4
19.7
19.6
19.6
-10.4
-9.6
-8.4
6.8
15.0
-15.4
-14.1
-14.1
5.8
Chemicals
9.3
-4.9
-3.2
1.8
-2.4
Precision Engineering
13.8
7.3
-4.9
11.6
-1.6
Transport Engineering
17.6
-13.4
-21.9
-16.8
-18.0
General Manufacturing
12.3
-3.4
-9.8
-1.6
-1.9
Industry Cluster Electronics Semiconductors Biomedical Manufacturing Pharmaceuticals
Jul-16
Aug-16
Jan-Aug 16
Growth (% y/y)
Total Manufacturing
100
0.7
-3.5
0.1
-0.1
Manufacturing Excluding Biomedical
80.4
3.8
-1.9
2.3
-1.8
Source: EDB
Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that the reader is able to assume these risks. This document and its contents are proprietary information and products of UOB Group and may not be reproduced or otherwise. Singapore Company Reg No. 193500026Z
