Manufacturing – now the brightest spot in the Singapore economy – turned in yet another outstanding performance last month, thanks largely to electronics makers.
This allayed some concerns that factories, which have been a key growth driver so far this year, might be losing steam.
Even if manufacturing continues powering ahead, however, the fact remains that there is still the rest of the economy to worry about.
Manufacturing surged 13.1 per cent last month, way above the 8.5 per cent forecast by economists and the fastest pace so far this year. This came amid fears that the sector might be hard-pressed to sustain the strong growth it had enjoyed earlier in the year – driven largely by surging global demand for semiconductors.
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Last month’s strong showing means Singapore’s second-quarter economic growth number will likely get an upgrade from an earlier estimate of 2.5 per cent, economists say.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye say “stronger manufacturing and a broadening recovery to financial, business and wholesale and retail trade services” likely helped lift overall economic growth in the second quarter to 2.8 per cent.
But it is still unclear how much of this boost is being felt outside electronics manufacturing and trade-related services.
United Overseas Bank economist Francis Tan said growth remains uneven even within the manufacturing sector, and the turnaround has been “overly reliant on the cyclical increase in the demand for semiconductors and its surrounding services, such as precision engineering”.
The marine and offshore engineering segment, for instance, remained weak last month, with output shrinking 11.8 per cent over the same month a year ago as low oil prices kept biting.
Economists have also previously warned that the lacklustre labour market is likely to keep weighing on consumer spending – so sectors that depend on local demand are unlikely to get a significant lift in the coming months.
Clusters like retail and food and beverage continue to face headwinds. Besides slower demand, retailers are facing longer-term challenges such as the rise of e-commerce.
Advance estimates of second-quarter growth showed that the construction sector is also struggling. It shrank 5.6 per cent, extending a 6.1 per cent contraction the quarter before.
Rate at which manufacturing grew last month, way above the 8.5 per cent forecast by economists and the fastest pace so far this year.
In an increasingly competitive, uncertain environment, it is becoming tougher for all sectors to be doing well at the same time.
It seems uneven growth might become the new normal in the Singapore economy.