Singapore likely to surge 9.1 pct on quarter in Q4 following surge in December industrial output, says DBS

The Singaporean economy is expected to register a surge of 9.1 percent q/q on a seasonally adjusted annual rate (saar) and 1.8 percent y/y. Expectations are for a neck-breaking expansion of 12.8 percent q/q saar. This will be the fastest sequential growth pace clocked since March 2011, and this should bring overall headline growth for the quarter to 2.6 percent y/y.

The key driver for the stunning GDP performance is a whopping 21 percent y/y surge in December industrial output as compared to a 6.4 percent expansion that was assumed within the advance estimates. Key electronics and biomedical clusters, which accounted for close to 50 percent of total manufacturing output were on a solid run in the quarter, DBS reported.

Output from the electronics cluster rose by 33 percent in Q4 2016 due to stronger production of semiconductors. On the other hand, the biomedical cluster was up by 34 percent in the quarter, on the back of robust production in both pharmaceutical products and medical devices.

Further, the run-up in December IP essentially lifted overall manufacturing growth for the quarter to 11.5 percent, compared to the previous projection of 6.5 percent. That alone will probably add about 0.9 ppt to the headline number.

Financial services and trade related services are expected to drive the turnaround in the overall services sector. Including earlier upward revisions to the growth figures for the previous three quarters, the economy is expected to have expanded by 2.0 percent in 2016.

"While a decline of 2.8 percent has been factored in the advance GDP estimates, we reckon that further downside could be on the cards. Manpower crunch and slowdown in residential construction activities will continue to weigh down on the outlook of the sector. Our GDP growth forecast for 2017 will have to be revised upward, pending the finalized GDP figures mentioned above," the report said.