Singapore: Industrial Production surprised to the downside – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest industrial production figures in Singapore.

Key Takeaways

“Singapore’s Sep industrial production (IP) came in below expectations as it was flat from Aug (0.0% m/m SA), which translated to a growth of 0.9% y/y in Sep.  Compounding the weaker trajectory was the downwardly revised Aug readings which is now at 1.6% m/m, 0.4% y/y. Excluding the volatile biomedical manufacturing, IP actually expanded by 2.8% m/m, 2.0% y/y in Sep.”

“The 0.9% y/y rise in Sep IP was due to the continued strong performances seen in transport engineering, general manufacturing, and precision engineering, offsetting the extended 3rd month decline in electronics, a 2nd month decline in chemicals and a fall in biomedical, of which pharmaceutical production declined by -8.5% y/y. The medical technology component of biomedical continued to rise although the pace was halved.”

“IP Outlook – Based on the Sep IP report, the manufacturing sector grew by just 0.8% y/y in 2Q compared to the 1.5% reported in the advance estimates released on 14 Oct. Assuming no major changes to the other sectors, we now expect 3Q’s GDP growth to be revised lower by 0.2ppt to 4.2% y/y, taking into account the lowered manufacturing expansion. We lower our Singapore 2022 manufacturing growth forecast to 3.5% (from 4.5% previously) and we keep our 2023 forecast unchanged as we expect the sector to contract by 3.7% next year due to the faltering outlook for electronics and weaker external demand. Despite the weaker 2022 manufacturing growth, we are retaining our 2022 GDP growth forecast unchanged at 3.5% as we see the upside surprise from services activities (due to strong pipeline of activities post- reopening of the economy) helping to compensate for the IP downgrade. But with the faltering 2023 manufacturing outlook, we expect GDP growth to ease noticeably to 0.7% next year.”