SINGAPORE: 2016 was the year when the manufacturing sector went into the doldrums but on the back of a global pick-up in demand especially for electronics, hopes now rest on the sector this year to lead the Singapore economy out of the woods, experts said.
In contrast, there are concerns over the services sector, which is suffering from geopolitical uncertainty, low consumer and business confidence as well as technological disruption.
The strength of the manufacturing recovery had surprised some economists. Heading into the New Year, the manufacturing sector posted its strongest performance of 2016 in the last three months of the year.
Advance estimates from the Ministry of Trade and Industry (MTI) showed that year-on-year, the sector grew at an eye-catching 6.5 per cent between October and December, compared with -0.4 per cent in Q1, 1.5 per cent in Q2 and 1.7 per cent in Q3.
Senior Economist at Maybank Kim Eng Research Chua Hak Bin said, “The broadening demand for chips across a range of new technology segments, including cloud (computing), Internet of Things, automobiles and power management is driving global electronics demand.”
ANZ economist Ng Weiwen cited the digitisation wave sweeping through the global economy, with businesses digitising their operations and leading to a rise in 3D printing, for example, as well as demand for consumer goods.
“Digital consumer goods need electronic parts especially semiconductors, and producers of this — South Korea, Taiwan, Singapore — are the beneficiaries from this increase in technology demand globally,” Ng said.
“The (rebound) was slightly surprising. It surprised a lot of research houses … What we are seeing is very firm demand for manufacturing products particularly in electronics.”
Around the world, purchasing managers’ indices — which measure the health of the manufacturing sector based on indicators such as new orders and inventory levels — are showing improvements.
“The sector is clearly out of the doldrums for everyone. That is also because the United States is on a firmer footing and the Chinese economy is stabilising. It is a synchronised upswing,” Ng said.
