AS signalled by the second-quarter flash estimates, industrial output was yesterday shown to have fallen in June, with electronics and pharmaceuticals crashing even more than had been expected.

Official early gross domestic product (GDP) data based on just April and May figures, released two weeks ago, indicated a 10.2per cent manufacturing growth in Q2. Given the robust manufacturing numbers of April and May, when output grew an average 18 per cent, it pointed to a contraction in June.

But Economic Development Board figures yesterday showed only 8.3 manufacturing growth for Q2, with the June contraction about four percentage points deeper than the market expected, at 7.4 per cent.

Output from the marine engineering and other transport segments remained strong last month. But pharmaceuticals output is notoriously volatile, and the EDB attributed June's sharp 52.5 per cent plunge to base effects and a change in product mix between June 2006 and 2007. It was the biggest fall in recent years.

Electronics posted a dip of just 0.7 per cent last month - and 2.5 per cent growth for Q2 - and most economists believe there could be an IT turnaround in the second half.

HSBC economist Prakriti Sofat said: 'The data support our view that the worst in the manufacturing sector is now probably behind us. For the year ahead, we think that exports will continue to show improvement - in line with the global trade cycle - allowing IP (industrial production) to trend higher.'

With the June manufacturing figures, the HSBC economists are looking at 8per cent GDP growth for Singapore in 2007, 'with services and construction being the main drivers'.

Over at United Overseas Bank (UOB), the economists think the electronics rebound in the second half will be modest, so they have scaled down their forecast of Q2 GDP growth by 0.2-point to 8 per cent.

But they are keeping their estimates of full-year manufacturing growth at 7.5 per cent, and GDP growth at 7 per cent.

In any case, UOB economists add, even as they expect pharmaceuticals output to grow by 10-15 per cent this year, they believe there will be more months like June when a sharp decline in the cluster sends the entire sector into the red.

In all, manufacturing output grew 6.4 per cent in the first half of the year - down from the paces in both halves of 2006.

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