Singapore: Manufacturing Outlook remains gloomy – UOB

Senior Economist at UOB Group Alvin Liew comments on the release of Industrial Production readings in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) extended its weakness with a -11.7% m/m SA, -8.9% y/y decline in Feb, from a revised -0.4% m/m, -3.1% y/y in Jan. The Feb contraction was way worse than Bloomberg’s median forecast of +1.1% m/m, 1.8% y/y but close to our forecast of -10.7% y/y. This was the fifth consecutive month of y/y decline and the worst streak since 2015. Excluding the volatile biomedical manufacturing, IP contracted by a smaller -4.9% y/y in Feb (from 7.1% y/y in Jan).”

“The Feb IP was weighed lower by sharper declines in electronics (-10% y/y from -4.8% in Jan) and chemicals (-14.9% y/y from -13.1% in Jan), while biomedical manufacturing output crashed heavily by -33.6% y/y, solely due to a -59% y/y plunge in pharmaceuticals output, its worst contraction since Jul 2008 (-69.6% y/y).”

“IP Outlook – Even if we excluded the volatility brought by the biomedical manufacturing component, the latest Feb IP print continues to affirm our downbeat manufacturing outlook, and thus, we maintain our forecast for Singapore 2023 manufacturing to contract by 5.4% due to the worsening electronics downcycle and weaker external demand. Cracks in the export outlook also became more pronounced with non-oil domestic exports (NODX) recording consecutive, deeper y/y contractions since Aug 2022. We are likely to see a few more months of y/y declines in NODX before improving in the 2H. We expect full year NODX to contract by -5.5% in 2023. In line with the negative trade and manufacturing projections, we also keep our modest 2023 GDP growth forecast of 0.7% (closer to the lower end of the official forecast range of 0.5-2.5%).”