Singapore: March 2019 industrial production
March 2019 industrial production
- The IPI contracted by 4.8% yoy in March due to declines in all clusters except for biomed, transport engineering and general manufacturing.
- External headwinds and benign core inflation risks to keep MAS monetary policy settings on hold for 2019, in our view.
The first IPI contraction since Dec 2017
Singapore’s industrial production index (IPI) fell 4.8% yoy in March while the preceding month’s growth was revised upwards to 2.6% yoy (+0.7% yoy previously), in contrast to the improvement in manufacturing PMI. IPI excluding biomed slumped 8.7% yoy in March (+0.3% yoy in February), the most severe decline in over three years. On a seasonally adjusted basis, IPI dropped 2.6% mom in Mar after a decrease of 3.8% mom in February.
Cooling period of electronics persists
The tech cycle downturn exerted itself in March as electronics production plunged (-15.3% yoy vs. +2.8% yoy in February), with pronounced slippages in semiconductor (-16.4% yoy), computer peripherals (-24.9% yoy) and data storage (-38.9% yoy). The tumble was consistent with the worsened electronics shipments in March (-26.7% yoy vs. -8.2% yoy in February).
Strikes in chemical and precision engineering industries
Chemical production fell into the negative territory (-2.7% yoy in March vs. +1.5% yoy in February) particularly due to sharp moderation in ‘other chemicals’ output expansion (+3.0% yoy vs. +30.3% yoy in February) alongside continued deteriorations in petrochemicals and specialty chemicals. Precision engineering sector’s contraction stayed steady at 13.3% yoy in March as the rebound in precision modules & components did not last long (-22.8% yoy vs. +7.8% yoy in February) and machinery & systems experienced its third consecutive month of decline (-6.9% yoy vs. -25.5% yoy in February). Last year’s higher base has started to show effects on transport engineering, where output growth continued to moderate to 1.8% yoy in March (+5.0% yoy in February) primarily weighed down by subdued work done in the marine & offshore engineering as well as land transportation segments.
Biomedical manufacturing sector still stands strong
Biomedical manufacturing maintained its double-digit growth in March albeit at a slower pace (+13.7% yoy vs. +14.6% yoy in February), buttressed by production of pharmaceutical drugs (+16.5% yoy) and medical technology (+7.0% yoy).
Monetary policy settings to remain unchanged in 2019
Headwinds from the tech and export cycles may subside by the middle of the year, providing a modest cyclical lift in 2H19. Nonetheless, Singapore’s economic expansion is poised to moderate to 2.3% in 2019 (+3.2% in 2018), which should keep core inflation pressures well under control. Against this backdrop, current monetary policy settings are likely to remain on hold and we reiterate our view that S$NEER policy band parameter will be left unchanged in October.
Originally published by CIMB Research and Economics on 12 April 2019.
This article has been edited to reflect its time-sensitivity.