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Singapore factory output suffers shock decline

June 27, 2008
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According to Reuters, Singapore''s May factory output unexpectedly fell 5.7 percent, reflecting a renewed steep decline in drugs production and providing more evidence that poor demand in the United States and Europe is hurting Asian manufacturers.

Economists said the drop may be due to manufacturers cutting production to avoid a build-up in inventories as demand in key markets weakens. They also warned that Singapore''s second-quarter economic growth will slow sharply from the first quarter when it soared an annualized 14.6 percent from the previous quarter.

Singapore''s manufacturing sector, a traditional mainstay in the Southeast Asian city-state''s economy, was worth about 26 percent of the country''s S$229-billion ($168 billion) economy in 2007.

Five economists had forecast that output would rise a seasonally adjusted 6 percent in May from April, on hopes drugs and technology production would recover after sliding the previous month in the sharpest fall since records started in 1983.

From a year earlier, factory output in May fell 12.8 percent, the Economic Development Board said in a statement, much sharper than market expectations for a 3.4 percent decline.


Economists said the 58.2-percent plunge in annual drugs production in May dragged on overall output.

Drugs production is volatile due to changing production cycles in factories when manufacturers change from one drug to the next.

Drugs production accounts for about a fifth of the total output, while electronics firms produce about a third of total output.

Annual electronics production in May rose 3.8 percent from a year ago.

Output from the various sectors on a seasonally adjusted basis were not immediately available.

Manufacturing sectors across Asia are expected to slow this year as the fallout from the subprime crisis takes its toll on big export markets.

The monthly manufacturing data follows a slide of 15.4 percent in April, revised from a fall of 16.2 percent, and a 0.4 percent gain in March.
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