Weakest link: Electronics cluster still in the slump amid 3.3% growth in Singapore’s industrial production

All other clusters are improving.

Industrial production for July is expected to register 3.3% YoY, representing a 1-2% uptick in sequential growth, which is pretty much in line with a 2.5% MoM sa rise in the non-oil domestic export sales in the month.

A report by DBS reveals that except for the electronics cluster, all other manufacturing industries are expected to report marginal improvement in output growth, reflecting the gradual global recovery that is in progress.

DBS adds that indeed, the weakest line is still the electronics cluster. Electronics export sales have been in the slump for the last 24 months. The recent “firm specific” disruption to production capacity is adding salt into the wound. While it remains to be seen whether the capacity disruption will be permanent (i.e. firm shutdown and relocation) or temporary (upgrade in production line), the impact on industrial growth has been manifested.

Moreover, while external demand is expected to pick up, DBS believes the sector is weighed down by structural challenges. Domestic restructuring has resulted in a labour crunch, which is crimping competitiveness and eroding margins given the associated wage pressure. Such structural shift will continue to put a lid on manufacturing growth despite possible upswing in demand ahead.