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Patchy performance in manufacturing

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Outlook for sector in next six months uncertain

The rallying manufacturing sector became the strongest driver of economic growth in the first half of this year but the outlook for the next six months looks less certain.

Manufacturing, which makes up a fifth of the economy, expanded for the 10th straight month in May on the back of a global export rebound that has lifted demand for Singapore's shipments, particularly in electronics.

But there are signs that this pickup may be tapering off - May's expansion was not only slower than in April, but also fell short of economist forecasts.

Output grew 5 per cent in May over the same month last year - down on the 6.7 per cent year-on-year rise in April and below the 7.5 per cent anticipated by private-sector economists in a Bloomberg poll.

Manufacturers told The Straits Times that performance across the sector has been patchy.

Growth in the semiconductor and precision engineering segments is expected to hold steady, but the oil and gas industry continues to be a drag, with prospects uncertain.

Strong global demand for semiconductors has been giving firms cause for cheer since the final quarter of last year.

Applied Total Control Treatment founder and managing director Marcus Sia said the company has recorded a 30 per cent rise in semiconductor and aerospace orders in the first six months of this year, compared with the same period last year.

His company provides metal finishing services to a variety of industries. He expects to see "strong and healthy" growth, especially in these two areas, in the next six months.

When it comes to the beleaguered oil and gas market, however, Mr Sia said that orders have gained slightly - but global political instability means that there is "no clear visibility" as to how it will do.

Mr Tan Ka Huat, managing director of industrial equipment manufacturer CEI, noted that segments such as aviation and semiconductors "look decent", but oil and gas "still languishes with no end in sight".

The gloomy outlook is also shared by Mr Lim Yu Jey, general manager of Lintech Engineering, which deals with customers in the energy sector: "Everybody is lacking sales options.

"We're not getting sales - and there's nothing much we can do."

CEI's Mr Tan said his company was relying on a diversified customer base to compensate for the weakness in oil and gas.

"It's quite stable for CEI because we have positioned quite well over the years, adding growing markets that aren't boom and bust but are growing at 5 per cent to 10 per cent, like medical technology," he added.