Manufacturing shrank a seasonally adjusted 9.8% from January, when it fell a revised 6.9%, the Economic Development Board said in a report on Monday. The median of eight forecasts in a Bloomberg survey was for a 0.7% gain.
The drop means Singapore may have trouble meeting its economic growth forecast of as much as 5% this year as near-record oil prices curb overseas demand, said economist Song Seng Wun. Production by companies including Chartered Semiconductor Manufacturing Ltd. and Merck & Co. accounts for a quarter of the $104 billion economy.
Two months of shrinkage in manufacturing suggests the first- quarter economic growth numbers will be weak, said Song, an economist at G.K. Goh Holdings in Singapore. The economy will have quite a bit to do in the remaining months to grow 5% this year, he added.
Growth in factory output in 2005 will probably lag behind last years 14% pace as oils 26% gain this year dents demand in Europe and the US, Singapores biggest overseas markets, economist Chua Hak Bin said.
Todays figures show the economy is slowing, said Chua, an economist at DBS Group Holdings Ltd. The governments estimate for first-quarter growth will be low.
The Ministry of Trade and Industry is scheduled to release the gross domestic product estimate for the first quarter on or before April 12.
From a year earlier, manufacturing shrank 10.2% in February because many plants were shut during the Lunar New Year holidays which last year fell in January, the EDB report said. For the first two months of the year, manufacturing gained 0.5%.
Output of electronics, which account for a third of production, fell 2.4% in February from a year earlier, following a revised 16.8% gain in January. Computer chips declined 2.9% after rising a revised 19% in January. Production of disk drives shrank 9.1%, the 11th decline in 12 months.
Pharmaceutical production in February shrank nearly 64% after falling a revised 11% in January.
Pharmaceutical makers periodically switch to producing a different chemical and shut plants for cleaning. Shutdowns and expansions cause swings in output because of the small number of the factories in Singapore.
Singapore has offered tax breaks to spur drugmakers to increase capacity as the island-state seeks to cut its reliance on electronics. The strategy may not keep growth from slowing as global demand for electronics slumps, economists said. Excluding pharmaceuticals and medical devices, production shrank 1.1% from a year earlier following a revised 17% gain in January.
Singapores exports may expand in 2005 at less than half of last years 17% pace because slowing economic growth in the US may pare demand for electronics, International Enterprise Singapore said on January 17.
The government expects economic growth to slow to between 3% and 5% this year from 8.4% in 2004.