Wednesday, May 28, 2008

Will Singapore survive a suffering export market?

Singapore's industrial production unexpectedly declined in April, the biggest drop in 10 months, as drug companies and electronic manufacturers reduced output.

Manufacturing, which accounts for a quarter of Singapore's economy, fell 5.7 percent from a year earlier, following a revised 18.1 percent gain in March, the Economic Development Board said today. Analysts predicted a 6 percent increase. Economists have warned that manufacturers in Singapore and across Asia face easing demand amid signs of a slowdown in the U.S., the region's largest export market. Singapore's trade promotion agency last week lowered its forecast for export growth this year to between 2 percent and 4 percent, from an earlier range of 4 percent to 6 percent.

"External demand is still weak and that doesn't bode well for Singapore's production in coming months,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore. "Manufacturing is likely to be badly hit.''

Industrial production fell a seasonally adjusted 16.2 percent in April from the previous month, after a revised 0.4 percent gain in March, today's report said. Economists were expecting a 5.5 percent decline. Pharmaceutical output fell 27.9 percent in April from a year earlier, after more than doubling the month before. Drugs make up around 22 percent of Singapore's manufacturing and electronics account for about 30 percent. Singapore's industrial output tends to fluctuate from month to month because of swings in production by drug companies which shut plants for cleaning before making different products.

Electronics production dropped 5.1 percent last month from a year earlier, following a revised 3.4 percent decline in March. The island's electronic exports have declined for 15 months.
Computer chip production in Singapore fell 7.4 percent in April from a year ago, from a revised decline of 6.7 percent the month before. Transport engineering output, which makes up more than a 10th of total manufacturing, gained 7.7 percent in April from a year earlier after advancing a revised 7.3 percent in March. Singapore's marine engineering companies such as Keppel Corp. and smaller rival SembCorp Marine Ltd. have won contracts worth billions of dollars for ships and oil rigs as record crude prices encourage companies to increase exploration. Oil prices reached $135.09 a barrel this month, and prices have doubled in the past year.
Production at marine and offshore engineering companies rose 15.1 percent, while aerospace-related output gained 1.7 percent last month.

Should Singaporean exporters already consider downsizing as foreign markets dwindle?