Singapore’s industrial production outlook remains weak despite stronger-than-expected January figures

Singapore's industrial output declined just 0.5% y/y in January, as compared with consensus expectations of a drop of 5.1%. Industrial production, on a seasonally adjusted month-on-month basis grew sharply by 9.3%. Pharmaceuticals mainly drove the growth in industrial production. It surged 34.3% y/y in January, as compared with a fall of 7.7% in December. However, excluding biomedical production, industrial output declined deeper by 7% y/y.

Certain strength in January seemed to have been brought forward from December that was considerably revised lower to -11.9% from -7.9%. This appears to be due to a sharp downward revision to December pharmaceutical output to a drop of 3.5% y/y, as compared with the earlier reported growth of 16.2% y/y. The downward revision is likely because of pharmaceutical firms misreporting on the timing of production activity.

A different factor helping the January industrial production growth was a one-time rise in electronics IP of 1.6%, before the Lunar Year holidays. This growth was after seven continuous months of contraction.

However, the headwinds of continuously weak external demand and renewed decline of oil prices are expected to keep external-oriented sector weak in 2016. Even if the strong IP growth for January might give certain comfort for Q1 GDP, the boost is very much focused on pharmaceuticals and limited to January. When looked at the broader range of industrial segments, the industrial outlook remains weak. The increase from services is also expected to fade slightly, mainly from tourism-related services and sentiment-sensitive activity.