May 26, 2016 / 5:31 AM / a year ago

Singapore factory output grows at fastest pace in nearly 2 years

SINGAPORE (Reuters) - Singapore’s industrial production in April grew at the fastest pace in nearly two years thanks to healthy output of electronics and pharmaceuticals, but analysts remain wary over the outlook due to sluggish global demand.

A worker welds steel at a factory in the industrial zone of Jurong in western Singapore April 4, 2016. REUTERS/Edgar Su/Files

Manufacturing output rose 2.9 percent from a year earlier in April, the largest increase since August 2014, data from the Singapore Economic Development Board showed on Thursday. The median forecast in a Reuters survey was a contraction of 0.3 percent.

On a month-on-month and seasonally adjusted basis, factory output rose 4.8 percent in April, exceeding the median forecast of an increase of 0.8 percent.

“If you look at some leading indicators such as the U.S. semiconductor book-to-bill ratio, I think there is some potential for the electronics sector to continue to cushion some of the other more sluggish sectors,” said Jeff Ng, an economist for Standard Chartered Bank.

“Given that a lot of the world demand is still pretty sluggish, there will be some pockets of growth in some sectors but I don’t see a broad-based recovery... It’ll be at best I guess stabilisation,” he added.

Singapore’s manufacturing sector has been a drag on the city state’s economy over the past year or so, with local exporters and oil rig builders hurt by slack global demand and a slump in oil prices.

Underscoring the challenges that lie ahead for the factory sector, Singapore slashed its export forecasts for this year on Wednesday after the trade-reliant economy barely grew in the first quarter.

Last month, Singapore’s central bank unexpectedly eased its exchange-rate based monetary policy as slackening global demand knocked its manufacturing sector and hobbled overall growth.

The boost to industrial production in April came from solid expansions in the output of electronics and pharmaceuticals.

Electronics output expanded 10.9 percent from a year earlier, after increasing 5.8 percent in March, while the volatile pharmaceuticals sector saw a 17.7 percent jump in April, after expanding 28.4 percent in March.

Marine and offshore engineering output fell 21.7 percent in April from a year earlier, after sliding 34.9 percent in March.

Reporting by Masayuki Kitano; Editing by Shri Navaratnam

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