Singapore’s industrial production (IP) experienced a slight recovery in July, increasing by 2.3% month-on-month seasonally adjusted, following a 7.0% decline in June, according to UOB Global Economics and Markets Research. Year-on-year, IP grew by 6.8%, aligning with Bloomberg’s consensus and close to UOB’s 6.2% estimate. This recovery was primarily driven by robust performance in transport engineering, particularly in the aerospace sector, which saw increased production of aircraft parts and sustained maintenance, repair, and overhaul (MRO) jobs from commercial airlines.
The chemicals sector also contributed to the growth, rising by 2.1% month-on-month seasonally adjusted, reflecting a slight uptick in oil refining activity and petrochemical output. This was likely influenced by the brief partial reopening of the Strait of Hormuz in mid-June. However, UOB warns of potential challenges ahead due to the re-intensification of the Middle East conflict.
Conversely, the electronics segment recorded a second consecutive month of contraction, with semiconductors declining by 5.3% month-on-month seasonally adjusted. This trend aligns with the sequential declines in integrated circuit exports observed in the June-July non-oil domestic exports (NODX) data. UOB notes that domestic firms may be facing capacity constraints, as indicated by the new orders sub-index of the electronics Purchasing Managers’ Index (PMI) outpacing the output sub-index. The decline in the stocks of finished goods sub-index suggests firms are drawing down existing inventories to meet demand, which could support electronics IP in the coming months as inventory replenishment becomes necessary.
Overall, whilst certain sectors show promise, challenges in the semiconductor industry highlight ongoing capacity constraints that could impact future production.
