July 26, 2018 / 5:02 AM / 4 months ago

UPDATE 1-Singapore factories grow better than expected in June, outlook cloudy on trade tensions

* Manufacturing output in June: +7.4 pct y/y, +3.9 pct m/m

* Outlook cloudy as trade tensions loom - analysts

By Fathin Ungku

SINGAPORE, July 26 (Reuters) - Singapore’s industrial production grew faster than expected in June, helped by a sharp turnaround of the marine and offshore sector, data showed on Thursday, but analysts say trade tensions cloud the outlook.

Industrial production in June rose 7.4 percent from a year earlier, easing from the revised 12.9 percent on-year rise the month before, but better than the 3.9 percent rise forecast by a Reuters poll, data from the Singapore Economic Development Board showed.

On a month-on-month and seasonally adjusted basis, industrial production expanded 3.9 percent in June, compared with a revised 0.3 percent expansion in May. The poll saw a 1.7 percent expansion.

Marine and offshore engineering spiked to 28.3 percent year-on-year in June, while April and May figures were revised as expanding to 5.5 percent and 11.6 percent respectively.

Singapore, a hub for shipbuilding and offshore support firms, has been hit by the rout in oil prices since 2015. Latest Singapore economic development data shows that the sector expanded for the first time in March after almost 36 months of consecutive decline.

“It does show that the improvement in oil prices has started filtering through the energy industry and is helping to bottom out the industries that were hit by the fall in oil prices in 2015 and 2016,” Jeff Ng, Continuum Economics’ chief economist of Asia Research told Reuters.

However, Ng questioned the sustainability of the sector’s growth as trade tensions between the United States and China loom.

“It depends a lot on the oil price outlook. Trade tensions may cause a downside to oil prices, causing more uncertainty to the sustainability of the sector,” Ng said.

Singapore’s full-year economic growth hit a 3-year high in 2017, thanks to its electronics production, prompting the Monetary Authority of Singapore to tighten policy for the first time in six years in April.

Analysts say positive export and manufacturing numbers point to another tightening in October, but the MAS could hold it off if trade tensions escalate. (Reporting by Fathin Ungku; Editing by Subhranshu Sahu)

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