Trade challenges weakened manufacturing production: analysts

Decrease in exports and decline in manufacturing index affected manufacturing.

Issues in trade continued to impact manufacturing activity in Singapore as the government recorded a decline in manufacturing output last month, brokers said.

The Economic Development Board figures showed that biomedical, electronics and chemicals output decreased in September 2022.

According to RHB’s brokerage report, the industrial production momentum will stay weak in the fourth quarter of 2022 due to trade demand. 

It cited the performance of exports which contracted 3.5% year-on-year, which is the seventh decline in the past eight months.

“We think the weakness in September’s electronic outbound shipments will likely persist into the end-year (and possibly into early 2023) amid the lacklustre global economic environment,” said RHB.

UOB, echoing RHB’s sentiments, noted the overall Purchasing Manager’s Index for manufacturing is still below 50, the first time it has shrunk since the COVID-19 pandemic.

“And even as we continue to be cautiously positive on the outlook for transport engineering, general manufacturing, and precision engineering, we see the worsening electronics performance and increasingly weaker demand from North Asian economies, especially China, are clearly weighing negatively on export momentum and manufacturing demand,” said UOB.

With these in mind, UOB downgrades its manufacturing growth forecast for 2022 to 3.5% from 4.5%. RHB also decreased its full-year outlook to 3% from 4%.