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

Key Takeaways

“Singapore’s industrial production (IP) came in below expectations for the second month in a row as it declined by -2.3% m/m SA in Jul, which translated to a weaker growth of 0.6% y/y, matching the low print recorded in Jan 2022 (from the revised Jun readings of -8.0% m/m, 2.6% y/y) and fell short of Bloomberg survey estimates but perhaps closer to UOB’s internal estimates.”

“The weaker IP result for Jul was due to 6.3% y/y contraction in electronics output and a 25.7% y/y fall in pharmaceutical production while the main sources of IP growth were from the continued expansions in transport engineering (18.6% y/y), general manufacturing (14.6% y/y), and precision engineering (13.9% y/y), and a surprise rebound in chemicals (5.3% y/y), more than offsetting the drags from electronics and pharmaceuticals.”

“Accounting for the Jul’s increase, Singapore’s IP expanded 4.9% in the first seven months of 2022. We continue to be cautiously positive on the outlook for transport engineering, general manufacturing, and precision engineering, to drive overall IP growth but we are now also cognizant about a potentially much slower electronics performance in the remaining months of 2022. We maintain our IP growth forecast at 4.5% in 2022 (from 13.2% in 2021) but we note the increased risk of a weaker IP trajectory due to the faltering outlook for electronics. In the same vein, our full year 2022 and 2023 GDP growth forecasts are also unchanged at 3.5% and 2% respectively but the manufacturing outlook indicates the risk to our growth outlook is on the downside, as well. In addition, another dampener to headline growth is the relatively higher base levels for the rest of 2022, as IP expanded by double digit growth rates between May and Dec 2021 (except for Sep 2021).”