SINGAPORE'S industrial production rose at the slowest pace in four months in June as pharmaceutical and electronics manufacturers made fewer goods, suggesting demand may ease as the global recovery cools.

A slowdown in pharmaceutical output has led Singapore's overall manufacturing index to plunge a record 23.4 per cent in June from May on a seasonally- adjusted basis.

Economists warned that the coming months could see further contraction as the drug-making cluster is likely to have plant-maintenance shutdowns in the third quarter.

Output at factories, which accounts for about a quarter of the economy, climbed 26.1 per cent last month from a year earlier, after a revised 58.4 per cent surge in May, the Economic Development Board said in a statement yesterday. The median estimate of 10 economists surveyed by Bloomberg News was for a 38.4 per cent gain.

Mr Song Seng Wun, economist at CIMB, said: "It is always hard to predict what drugs will do. If we take away drugs, the underlying number is not doing too badly, declining by almost 2 per cent sequentially."

Barclays Capital economist Wai Ho Leong agreed. "The downside we're seeing is entirely pharmaceutical-driven, so I'm not too worried about the numbers. This has also been priced into Singapore's second-quarter GDP figures. I think Singapore's industrial production is still healthy."

Singapore's economy grew at a record pace in the first half as demand for its computer chips and manufactured goods recovered from a trade slowdown that pushed the nation into a recession last year.

The outlook for the rebound is clouded as governments in Europe embark on austerity programmes to cut deficits and households in some of the world's largest economies hold back spending.

Production in the second quarter rose 44.5 per cent, less than the Government's preliminary estimate earlier this month of 45.5 per cent. Singapore's economy accelerated to an unprecedented 18.1 per cent pace in the first half, prompting the Government to raise its GDP forecast for the third time this year to as much as 15 per cent.

Electronics production jumped 46.8 per cent from a year earlier, following a revised 52.1 per cent gain in May. Pharmaceutical output climbed 30.8 per cent.

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