Despite falling short in the last month of 2017, the overall performance of Singapore's manufacturing sector was actually its strongest since 2010.
According to UOB Global Economics and Markets Research economist Francis Tan, Singapore managed to record an industrial production (IP) growth of 10.1 percent for the whole year of 2017. This is despite the lackluster December data which showed a 3.9 percent decline year-on-year.
"Although Singapore's IP dipped into the contractionary zone for the first time in 17 months, it was in part due to the high base recorded in December 2016. As we go into 2018, we are still optimistic about the recovery story in Singapore's manufacturing industries, aided by the still-strong external demand for our semiconductor exports," Tan said.
The overall slowdown in manufacturing activities in December was due to the moderation in the expansion of the electronics cluster and the decline in the biomedical manufacturing cluster.
Although still reflecting an expansion, the electronic sector's 4.2 percent expansion is its first single-digit growth in 19 months. However, it has performed quite well the whole year, registering a 33.5 percent growth.
Output in the precision engineering cluster jumped by 18.2 percent in December, its 17th consecutive month of expansion. Overall, this segment rose by 17.8 percent.
The chemical cluster grew at a quicker pace in December at 14.4 percent, thanks to the increasing production of petrochemicals. For the whole year, it gained 6.2 percent.
Bucking the growth trend is the biomedical and the transport engineering clusters, posting a monthly decline of 34.7 percent and 11.7 percent, respectively. For the whole year, the biomedical segment posted a 9.3 percent downfall and the transport engineering cluster slumped by 6.9 percent.
Looking ahead, Tan raised caution that the semiconductor demand boom in the Asia Pacific may soon fade.
"However, we had previously been warning that the on-year double-digit type of semiconductor growth in 2017 may no longer be a familiar sight in 2018, as the Asia Pacific semiconductors sales have slowed quite considerably," he said.
With this, Tan said Singapore's industrial production for 2018 could register a slower growth of 4.4 percent.