Is Singapore selling the tech it's making?

Output has been rising even if new orders have been falling since November.

UOB economist Francis Tan warned that even if Singapore’s manufacturing output grew 11.1% in May and 9.8% in the first five months of 2018, the high base of the electronics cluster from 2017 may result in a slower pace of expansion in the months ahead.

“Singapore’s non-oil domestic exports (NODX) of electronic products had been contracting for six consecutive quarters and there is no reason to keep producing electronic products (which are intermediate goods and of no use to the end-consumer in its current state) without exporting them,” he said.

Tan also noted that the monthly purchasing managers’ index released by the Singapore Institute of Purchasing & Materials Management (SIPMM) also shows that electronics purchasing managers are reporting quite high levels of inventories, whilst new orders had been on a downtrend since a recent peak in November 2017.

JP Morgan economist Alan Lee concurred, “Other production clusters remained weak with sequential trend rates further declining. In addition, we note the sharp sequential trend uptick in Taiwan electronics output which contrasts with Singapore’s tech output.”

Lee noted that the trend looks consistent with their expectation is activity slowing into 2H2018, similar to the dynamics in production across other regional exporters.

If such trends continue, Tan said production growth may slow materially further. “We are also watchful of the potential negative spillovers from the US-China trade tensions, which may affect Singapore’s manufacturers both in terms of a slowdown in real export orders as well as business sentiments. China is Singapore’s largest exporting partner and if trade slows down between China and the US due to rising trade tensions, Singapore will be impacted,” he added.