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Factory output up 5.9% in March

Manufacturers turned in a good performance in March although experts tip that output will dip in coming months.

Factory output rose 5.9 per cent last month compared with March last year - just above economist predictions of a 5.7 per cent rise.

If volatile biomedical manufacturing is excluded, output grew 8.6 per cent year on year.

But on a seasonally adjusted basis, it edged up just 0.3 per cent in March over February and fell 4.3 per cent, excluding biomed output, according to preliminary Economic Development Board (EDB) figures yesterday.

The March growth figure of 5.9 per cent was behind February's year-on-year increase of 6.7 per cent.

Economists maintained their gross domestic product (GDP) growth estimates but they expect manufacturing to slow as the year progresses compared with 2017's strong showing.

Manufacturing growth in the first quarter was 9.8 per cent compared with the same period last year, which OCBC head of treasury research and strategy Selena Ling called "a healthy start for 2018".

But she expects output growth to ease to 7.9 per cent year on year in this quarter and slow further in the second half of the year.

UOB economist Francis Tan said the first-quarter showing reflects "continued resilience in the manufacturing sector", but he also expects slower expansion over the next three quarters.

"This could be especially true for the electronics cluster," he added.

Electronics continued to be the strongest performer in March, with output up 12.4 per cent year on year.

The semiconductor industry's 18.8 per cent growth more than made up for declines in most other electronics segments.

Electronics as a whole saw a stronger first three months compared with 2017, with output up 19.2 per cent.

Precision engineering's output rose 10.5 per cent in March, with the precision modules and components segment growing 31.1 per cent.

Chemicals were up 8.2 per cent in March on the back of growth in all segments, led by a 20.4 per cent rise in petrochemicals output.

Transport engineering grew 3.5 per cent, led by the aerospace segment's 13.1 per cent rise. In contrast, the marine and offshore engineering segment contracted 6.5 per cent.

A 4.4 per cent rise in food, beverages and tobacco was more than offset by declines of 3.2 per cent in miscellaneous industries and 13.3 per cent in printing.

Biomed manufacturing fared worst, with output declining 5.4 per cent year on year in March.

Economists maintained their forecasts for full-year factory output growth, with Mr Tan expecting 4.4 per cent and Ms Ling, 4.5 per cent.

Ms Ling also kept her full-year GDP growth forecast of 3 per cent, "while awaiting further clarity on how the downside risk from the United States-China trade tensions will pan out".

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye worry that China-US trade tensions may cause businesses to defer expansion plans. But their full-year GDP growth forecast remains at 3.1 per cent, "with a manufacturing slowdown partly offset by a broader services recovery in the remaining three quarters".