Singapore: Industrial Production disappointed in June – UOB

Alvin Liew, Senior Economist at UOB Group, reviews the latest Industrial Production figures in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) came in below expectations in Jun as it declined by 8.5% m/m SA, which translated to a weaker growth of 2.2% y/y, the lowest since Jan 2022 (from the revised May readings of 9.2% m/m, 10.4% y/y and fell short of Bloomberg survey estimates.”

“The main sources of IP growth were unchanged from May, but transport engineering took the lead in driving IP growth while electronics output growth eased markedly following a surprise 2.6% y/y fall in semiconductor. The other growth segments were general manufacturing and precision engineering, more than offsetting the continued weakness in biomedical (of which pharmaceuticals production plunged -24.9% y/y) and chemicals (of which petrochemicals remained the main drag).”

“Based on advance estimates released by Ministry of Trade and Industry on 14 Jul, Singapore’s economy grew by 4.8% y/y in 2Q with contribution for all the three major sectors including manufacturing which expanded by 8% y/y. However, based on the Jun IP report, the manufacturing sector is likely to have grown by less, at 5.7% y/y in 2Q. Assuming no major changes to the other sectors, we now expect 2Q’s GDP growth to be revised lower by 0.3ppt to 4.5% y/y, taking into account the lowered manufacturing expansion.”

“Singapore’s IP expanded 5.6% in the first half of 2022. We continue to be cautiously positive on the outlook for electronics, transport engineering, general manufacturing, and precision engineering, to drive overall IP growth but we are also cognizant there is an easing trend in sales since the peak in Jun 2021about the attendant external risks including (1) Russia-Ukraine conflict driving commodity prices higher, (2) global supply disruptions due to China’s zero-COVID policy, (3) monetary policy tightening stance in the advanced economies slowing growth and (4) resurgence of COVID-19 infections and/or new variants. In addition, another dampener to headline growth is the relatively higher base levels for the rest of 2022. We maintain our IP growth forecast at 4.5% in 2022 (from 13.2% in 2021) while our full year 2022 GDP growth forecast is also unchanged at 3.5%.”