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Singapore's factory output rose a seasonally adjusted 4.0 percent in May, confounding market expectations for a fall, as oil rig sales and drugs production surged, data showed on Tuesday.
The island's output figures, which mirrored a big jump in industrial output in Taiwan on Monday, could rise even more in the second half on an expected rebound in electronics and strong orders for big-ticket items such as oil rigs.
Taiwan, which like Singapore depends heavily on the electronics sector, saw industrial output in May grow at its fastest pace in nearly a year as the economy benefited from a recovery in US demand.
The increase compared with forecasts for a seasonally adjusted 1.1 percent decline in May from the previous month, when output rose 8.5 percent, revised up from 7.9 percent.
Vishnu Varathan, an economist at Forecast Ltd, said that Singapore's stronger-than-expected May factory output follows optimism in other Asian markets such as Taiwan and South Korea that tech production would pick up later this year. "The region, overall, is cautiously optimistic about the manufacturing sector, despite persisting weakness in the electronics sector," he said.
From a year earlier, Singapore's factory output in May rose 17.7 percent, the Economic Development Board said in a statement, beating a market forecast for an 11.0 percent rise.
"A lot of strength came from transport and engineering, which was not really a surprise. Demand for marine and offshore rigs has not abated and will continue to be strong going forward," Varathan said.
Transport engineering, which includes oil rig production, rose a seasonally adjusted 22.3 percent in May from April, the Economic Development Board said in an e-mail to Reuters, outweighing an 11.5 percent contraction in electronics. From a year earlier, the transport engineering sector expanded 39.5 percent in May, while electronics production was unchanged.
"While it is still lacklustre on the electronics side, we're optimistic that that's coming back on track in the course of the second half. Global demand should be supportive," said David Cohen of Action Economics.
In the electronics sector, chip production rose 8.2 percent from a year earlier, while disk drives and consumer electronics declined 8.6 percent and 11.6 percent, respectively.
The precision engineering sector shrank a seasonally adjusted 1.4 percent in May from April, while output from general manufacturing industries fell 2 percent, the Economic Development Board said in its e-mail.
There are no seasonally adjusted figures for the bio-medical sector, it said, but drugs output surged 82.9 percent from a year earlier. Manufacturing accounts for about a quarter of Singapore's trade-dependent economy.

Copyright Reuters, 2007

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