Singaporean industrial production contracts sharply in November, manufacturing output to stabilize in December

Singaporean industrial production dropped in the month of November. On a year-on-year basis, the industrial production dropped 9.3 percent, while it fell 9.4 percent sequentially. Today’s print is considerably below expectations of a fall of 0.8 percent on a year-on-year basis and a drop of 0.3 percent sequentially. Today’s data also marked a return to contraction after two straight months of positive on-year growth and is also the largest fall recorded since December 2015. In the meantime, the October reading was downwardly revised to 3.6 percent year-on-year, down from the initial estimates of 4 percent year-on-year. This brought the first 11 months’ manufacturing performance to -1.6 percent year-on-year.

The fall was mainly due to electronics that shrank 20.9 percent year-on-year in the month, reversing the 0.9 percent growth recorded in the prior month. Electronics were mainly weighed in by computer peripherals and semiconductors that more than countered growth in other industry segments like infocomms and consumer electronics.

Both the domestic manufacturing and electronics PMIs had rebounded to 49.8 and 49.7 respectively in November. However, the prints were below the 50 expansion threshold, implying that a clear turnaround for the sector was not on the cards yet, noted Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

Biomedical cluster also added to the softness, with the output dropping 10.3 percent year-on-year in November, due to a plunge in the output for pharmaceuticals and medical technology. Excluding the biomedical cluster, the manufacturing output dropped 9 percent year-on-year in November.

The other manufacturing segments did not perform so badly. The precision engineering output rose 9.7 percent year-on-year, lifted by the machinery & systems segment in the midst of increased activity in front-end semiconductor equipment and mechanical engineering work, as well as higher output in optical products and other metal precision components.

“The November manufacturing output data was clearly a negative surprise to the recent green shoots theme developing in the global and regional economic landscape. We tip 4Q19 GDP growth estimates, which are due on Thursday 2 January 2020, to come in around 0.2 percent yoy (-1.6 percent qoq saar). This implies that the full-year 2019 GDP growth could be around 0.5 percent yoy, which is at the lower end of the official growth forecasts”, said Selena Ling.

Manufacturing output is expected to stabilize around -2.5 percent year-on-year and the fourth quarter manufacturing growth might come in at -2.7 percent.

“Our 2020 GDP growth forecast for the Singapore economy remains at 1-2 percent yoy, predicated on a modest manufacturing recovery with the services and construction sectors as providing the growth bulwark. Since global monetary policy accommodation appears to have largely run its course for now, the onus will turn to fiscal policy stimulus to come to the rescue of tepid demand conditions”, added Selena Ling.