Is electronics sector able to save weak manufacturing output?

It comprises 27.4% of total output.

The manufacturing sector emerges from the red in August after output increased 0.1%. While it is below market expectations of 0.5% the growth is better than July's contraction of 3.5%, thanks to the star performance of the electronics sector.

According to UOB, 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.

According to UOB, the strong electronics output coincided with the better-than-expected August export orders in Taiwan that was released last week, boosted by electronics exports.

Furthermore, over in the U.S., the research firm said that 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.
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UOB cautioned though that 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)," it said in a report.

UOB also added that 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," it said.