Singapore’s October industrial production rebounds to highest since July, better than market expectations

Singapore’s industrial production rebounded 4.3 percent y/y (2.0 percent m/m sa) in October, compared to -0.1 percent y/y (-4.7 percent m/m sa) in September. This is better than the 0.7 percent y/y (0.5 percent m/m sa) that was expected, and a reversal from the -0.1 percent y/y (-4.7 percent m/m sa) seen in September. The October prints also marked the highest YoY print since July 2018 as well as the first on-month rebound after three consecutive months of mom contractions.

Excluding biomedical, manufacturing output grew by 3.0 percent y/y (3.9 percent m/m sa) in October. Apart from electronics which underperformed by shrinking 2.7 percent y/y due to the drag from continued weakness in semiconductor, computer peripherals and data storage segments, other manufacturing segments saw decent y/y expansions.

The latter included transport engineering (especially the marine & offshore sector which is coming off a low base in October last year, coupled with higher commercial airline MRO activities) and pharmaceuticals (albeit still volatile depending on the mix of active ingredients).

For the first ten months of this year, the overall industrial production has expanded by 7.5 percent y/y (7.9 percent y/y excluding biomedical), which is relatively resilient given the deterioration in the external environment due to the escalating US-China trade war and the moderation in the global electronics momentum.

While the manufacturing activity may moderate slightly towards the year-end, we do not see a significant drop off in momentum. Recall that when the Q3 GDP growth revisions were released last week, the official forecast was narrowed to 3-3.5 percent y/y for 2018. Any deceleration in manufacturing in Q4 this year would be manageable and overall GDP growth is unlikely to undershoot the 2 percent y/y handle by much in the last quarter.

As such, the the economy is still on track for 3.3 percent y/y GDP growth for 2018. For 2019, 2-3 percent GDP growth still appears reasonable. Market sentiments may in the near-term remain sensitive to the Trump-Xi meeting headlines this Friday on the sidelines of the G20 meeting, but any “deal” (possibly in the form of an agreement not to levy further fresh bilateral tariffs), while it may ease some downside trade risks for 2019 does not herald significant upside global growth risks per se, the report added.