Singapore: August 2018 industrial production

By Michelle Chia, Economist, CIMB Research and Economic and Sofea Azahar, Economist, CIMB Research and Economics


HIGHLIGHTS

August 2018 industrial production

  • Singapore’s industrial production index (IPI) expanded 3.3% yoy in August
  • The country recorded weaker readings in the electronics, biomedical, petrochemical and transport engineering clusters.
  • We expect MAS to stand pat on its monetary policy in October due to Singapore’s weaker growth profile and benign inflation outlook in 2H18F.

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Momentum in manufacturing sector slows in August
The IPI softened to 3.3% in August, below market expectations (CGS-CIMB: +3.9% yoy, Bloomberg consensus: +4.7% yoy, Jul: +6.7% yoy). Manufacturing activity ex biomedical rose at a slower clip of 3.0% yoy in August (+5.8% yoy in July). On a seasonally-adjusted basis, the IPI declined further by 2.0% mom, after contracting 1.2% mom in July.

Electronics IPI moderates further but semiconductor rebound
The streak of slowing electronics output growth prolonged into a third straight month in August (+3.6% yoy vs. +5.1% yoy in Jul), dragged down by computer peripherals (-27.0% yoy), data storage (-13.5% yoy) and consumer electronics (-3.3% yoy). The pick-up in semiconductors (+7.8% yoy), which account for 62% of the electronics cluster, and other electronic components (+19.4% yoy) were silver linings, reinforcing improvements in Singapore’s forward-looking electronics PMI (52.0 in August vs. 51.6 in July) and new orders (53.5 in August vs. 52.9 in July).

Slower demand deals a blow to biomedical cluster
Biomedical manufacturing output eased sharply in August (+4.2% yoy vs. +10.4% yoy in July), pulled down by lower production of pharmaceutical & biological products (+8.7% yoy vs. +14.1% yoy in July), as well as contraction in the medical technology segment (-8.2% yoy vs. -0.1% yoy in July).

Mixed performance across other industries
Gains in the chemical sector toned down in Aug (+5.7% yoy vs. +7.6% yoy in July), despite robust growth in specialty chemicals (+14.2% yoy), as petrochemical capacity was idled by plant maintenance shutdowns resulting in output declining 2.4% yoy. Precision engineering production picked up in August (+5.6% yoy vs. +2.4% yoy in July), driven by a sharp uptick in optical instruments. Meanwhile, transport engineering output eased to 4.7% yoy in August (+16.2% yoy in July) due to slower activity in land transport and aerospace.

Sticking to the script
The consensus view on the Monetary Authority of Singapore’s (MAS) next course of action is mixed, with markets split between calling for a pause on or a further tightening of its monetary policy. We tilt to the view that MAS will retain its guidance for a ‘modest and gradual’ appreciation of the S$NEER in October given the weaker growth profile and benign inflation outlook in 2H18F.

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Originally published by CIMB Research and Economics on 27 September 2018.