Singapore’s robust industrial production data for September likely to boost 3Q16 GDP

Singapore’s industrial production growth in September exceeded market expectations. September industrial production surprised on the upside, printing a robust 6.7 percent y/y (+3.3 percent m/m sa), beating consensus  at +1.0 percent y/y.

Revisions were made to August industrial production growth up to 0.5 percent y/y (from a previous print of 0.1 percent y/y). Singapore’s 3Q16 industrial production now stands at 1.3 percent on-year basis, a marginally slower clip compared to 2Q16’s 1.4 percent.

Electronics which was up 15.9 percent, its seventh straight month of positive growth was seen as the main driver. Analysts remain skeptical about the sustenance of strength in the manufacturing industry, especially in the electronic cluster. Moreover, growth in Singapore’s non-oil domestic exports in September remains in negative territories -4.8 percent y/y, year-to-date growth -4.2 percent y/y.

"Given Singapore’s export-driven economic structure, we remain unconvinced if industrial production growth can hold up in the absence of a recovery in Singapore’s trade numbers. Still, the upside surprise would bring about an upward revision in Singapore’s 3Q16 GDP, where growth is now likely to print 1.1% on-year terms, up from 0.6% as seen from the recent advance estimates. Importantly as well, it will imply a less severe decline of 2.6% q/q saar, versus the previous estimate of -4.1%," said OCBC Bank in a report.