Is electronics sector able to save weak manufacturing output?

It comprises 27.4% of total output.

The manufacturing sector emerges from the red in August after output increased 0.1%. While it is below market expectations of 0.5% the growth is better than July's contraction of 3.5%, thanks to the star performance of the electronics sector.

According to UOB, gains were seen in the electronics (+10.8% y/y), chemicals (+1.8% y/y), and precision engineering (+11.6% y/y) clusters in the month of August.

More specifically, the output of semiconductors grew 19.7% y/y (from 34.4% y/y in July), and registered the 6th month of double-digit growth, and in line with the nine consecutive months of expansion in the US SEMI Book-to-Bill ratio.

According to UOB, the strong electronics output coincided with the better-than-expected August export orders in Taiwan that was released last week, boosted by electronics exports.

Furthermore, over in the U.S., the research firm said that telcos such as T-Mobile and Sprint Corp reported that they had received almost 4 times as many orders for the iPhone 7 compared to previous models and this will likely boost the demand for semiconductors in the months ahead.

UOB cautioned though that however optimistic the electronics cluster may be, it is only 27.4% of total manufacturing activities.

"Concerns on the still-weak exports conditions, particular the uncertainty evolving Brexit and its impact on Singapore’s exports to the EU, will mar the prospects on other manufacturing clusters, (more specifically for a Euro-zone dependent biomedical manufacturing cluster)," it said in a report.

UOB also added that the transport engineering cluster still remains in the doldrums.

"We maintain our 2016 industrial production growth forecast 1.0%. This implies a 3.0% y/y growth in the remaining 4 months till the end of 2016," it said.

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