Singapore: January 2019 industrial production

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


HIGHLIGHTS

January 2019 industrial production

  • Singapore‟s IPI fell 3.1% yoy in Jan, the first decline in 13 months, due to setbacks in the electronics and precision engineering clusters.
  • Potential de-escalation in US-China trade tensions may be insufficient to counteract near-term risks to the manufacturing outlook in Singapore.

Factory output declined 3.1% yoy in January
Singapore‟s industrial production (IPI) declined by 3.1% yoy in January after a downwardly revised expansion of 1.7% yoy in December, in line with consensus estimates but better than our expectations of a 3.8% decrease. Excluding biomed, the IPI contracted 5.9% yoy in Jan (-3.0% yoy in December). On a seasonally adjusted basis, IPI rose 0.9% mom in January (- 5.2% mom in December).

Electronics downturn persists amid challenging year-ago base
The electronics sector contracted again in January (-13.7% yoy vs. -11.5% yoy in December) due to a high year-ago base in the semiconductor (-14.2% yoy in January vs. -12.7% yoy in December) and info-communication & consumer electronics segments (-20.4% yoy in January vs. +7.2% yoy in December). At the same time, structural declines in the production of data storage and computer peripherals continued to weigh on the electronics sector.

Drugs can’t kill the pain this time
While drugs had helped to prop up the manufacturing sector in recent months, the growth in biomedical manufacturing moderated to 10.0% yoy in January (+29.8% yoy in December). Pharmaceuticals output growth slowed to 13.5% yoy in January after a jump of 41.1% yoy in December as base effects overwhelmed the segment‟s 7.5% mom increase.

Robust transport engineering cushions dip in precision engineering
Sustained activity in the marine & offshore and aerospace clusters propelled the transport engineering sector to a solid 20.2% expansion in January (+27.7% yoy in December). However, output in precision engineering fell 15.7% yoy in January (-7.0% yoy in December) dented by weaker demand for machinery & systems, in particular semiconductor equipment. The chemicals sector rebounded in January (+2.0% yoy vs. -1.7% yoy in December), as the contraction in the petrochemicals segment moderated (-1.8% yoy in January vs. -10.6% yoy in December) while increased production of fragrances boosted output in “other chemicals‟ to 18.2% yoy in January (-2.5% yoy in December).

Tariff reprieve may not deflect from weakening external demand
On 25 February, President Donald Trump said the US would delay tariff increase from 10% to 25% on US$200bn of China imports due on 1 March, citing “substantial progress” in trade negotiations with China. Yet, a tariff reprieve may not provide a sufficient boost against waning growth momentum in advanced economies and China in the near term, which has resulted in Singapore manufacturers reducing inventory levels amid weakening order books. Hence, we maintain our GDP growth forecast of 2.6% in 2019F (+3.2% in 2018).

Originally published by CIMB Research and Economics on 26 February 2019.

This article has been edited to reflect its time-sensitivity.