Manufacturing output contracted 10.2 percent from a year earlier as pharmaceuticals and electronics production tumbled, the Economic Development Board (EDB) said.

Analysts had expected February output to expand 4-10 percent and said the actual outcome could make it harder for the city-state to achieve the median 4.7 percent March quarter gross domestic product (GDP) growth projected by private sector economists surveyed by the government.

On a month-on-month basis, output shrank 9.8 percent in February.

The decline hit investor confidence in the stock market, where the Straits Times Index fell 7.09 points or 0.33 percent to 2,144.36.

"The manufacturing numbers are not particularly encouraging," UOB Kay Hian director Chan Tuck Sing said.

The EDB and other analysts agreed that fewer working days in February because of the Lunar New Year holidays exacerbated the decline. In 2004, the holiday fell in January.

The manufacturing sector, which accounts for a quarter of Singapore's trade-reliant economy, had grown 9.9 percent in January.

For the first two months of 2005, output was up just 0.5 percent from the same period last year, sharply lower than analysts' expectations of up to 10 percent.

Song Seng Wun, an economist with GK Goh brokerage, downgraded his projection for March quarter GDP growth by nearly half to 2.6 percent from 4.8 percent.

He said the official government target of 3-5 percent GDP growth this year still remained achievable if the biomedicals cluster, of which pharmaceuticals is a major component, rebounded in the coming months.

"If the biomedical cluster continues its lacklustre showing, this year's growth target will definitely be affected but having fallen so much, there's a lot of upside," he told AFP.

Hoe Woei Chen, an economist with United Overseas Bank, also revised her forecast for the first quarter GDP growth to 3.5 percent from 4.7 percent.

"Manufacturing output was much weaker than we had expected but for March we could see an improvement because the biomedicals cluster could improve," she said.

David Cohen, of research house Action Economics, said he would trim his March quarter GDP forecast but remained optimistic for the rest of the year.

"It was definitely below expectations, although the decline was exaggerated by the Lunar New Year," Cohen said.

"But the 3-5 percent growth target this year is still within reach given the underlying strength of the US and China supporting global export demand ...

We are still looking at the higher end of the range."

Output for the city-state's volatile pharmaceuticals sector plunged 63.6 percent after a nearly 11 percent drop in January.

The EDB said the decline was due to a different product mix and the manufacture of some products being rescheduled to the later part of the year.

The electronics cluster contracted 2.4 percent in February but the decline was more pronounced in computer peripherals where production plunged 21.4 percent. This was double the 11.4 percent fall in January.

Semiconductors dropped nearly 3 percent, while data storage was down 9.1 percent. Information and communications products saved the day for the sector by rising 41.6 percent.

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