Singaporean industrial production contracts year-on-year in December, rises sequentially

Singapore’s industrial production dropped year-on-year in December; however, it recovered on a sequential basis. On a year-on-year basis, the industrial output fell 0.7 percent, but rose 4.1 percent sequentially. Consensus expectations were for the output to fall 0.6 percent year-on-year and rise 4.4 percent sequentially. Today’s print shows that the manufacturing output has contracted for six out of 12 months. Stripping the biomedical cluster, industrial output dropped a more severe 3.2 percent year-on-year and rose 1.1 percent sequentially in the month.

As was expected, biomedical output outpaced that of electronics output. Biomedical output grew 10.3 percent year-on-year, led by medical technology and pharmaceuticals, whereas the electronics cluster eked out marginal growth of just 0.2 percent year-on-year. Meanwhile, the precision engineering cluster also saw output rise 7 percent year-on-year, linked to higher output of optical products and metal precision components. However, the main drags came from the transport engineering, general manufacturing and chemicals clusters.

2019 was a lacklustre year for the manufacturing sector where output dropped 1.4 percent year-on-year, with only the biomedical and general manufacturing clusters registering full-year growth. Markedly the key electronics cluster shrank 7.4 percent, dragged by computer peripherals and semiconductors. The milder December contraction in industrial production suggests possible upside for the fourth quarter growth estimate and it might be upwardly revised to 1 percent year-on-year, and in turn full-year 2019 GDP growth might be upwardly revised to about 0.8 percent year-on-year as well, said Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

“Our 1-2 percent GDP growth forecast for the Singapore economy was predicated on the domestic manufacturing sector staging a modest recovery to 1.5 percent in 2020.  That said, the recent coronavirus outbreak originating from China to other countries including Singapore may impart some uncertainty to near-term business and consumer sentiments which could mean a more muted 1Q20 growth momentum, depending on the duration and severity of this virus”, added Selena Ling.