Singapore: Industrial Production surprised to the upside – UOB

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

Key Takeaways

“Singapore’s industrial production (IP) came in above expectations as it rose by 2.0% m/m SA, which translated to a growth of 0.5% y/y in Aug, (from the upwardly revised Jul readings of -2.1% m/m, 0.8% y/y). Excluding the volatile biomedical manufacturing, IP actually contracted by -2.9% m/m, 1.2% y/y% y/y in Aug (from an upwardly revised -0.9% m/m, 3.1% y/y in Jul).”

“While the Aug IP beat expectations, it was due to a rebound in pharmaceutical production (6.4% y/y). Other main sources of IP growth were from the continued expansions in transport engineering (32.8% y/y), general manufacturing (18.8% y/y), and precision engineering (2.9% y/y), offsetting the declines in electronics output (-7.8% y/y) and chemicals (-11.2% y/y).”

“Accounting for the Aug’s increase, Singapore’s IP expanded 4.4% in the first eight months of 2022. The latest dip in Aug electronics PMI (to 49.6, first contraction after two years of continuous expansion, and the lowest reading since Jul 2020) painted a consistent picture from what we saw in the latest NODX and manufacturing data, a start of the electronics downcycle. We continue to be cautiously positive on the outlook for transport engineering, general manufacturing, and precision engineering, to support overall IP growth but we see a weaker electronics performance and slowing demand from North Asian and key developed economies that could increasingly weigh on NODX momentum and manufacturing demand. We keep our Singapore manufacturing growth forecast at 4.5% in 2022 (from 13.2% in 2021) but we expect the sector to contract by 3.7% in 2023 due to the faltering outlook for electronics and weaker external demand. In the same vein, our 2022 GDP growth forecasts are also unchanged at 3.5% but the faltering 2023 manufacturing outlook indicates the downside risk to our GDP growth projection next year.’