Singaporean industrial production decelerates in August

Singaporean industrial production decelerated in the month of August. On a year-on-year basis, industrial output rose 3.3 percent, slowing down from 6.7 percent seen in the prior month. On a sequential basis, industrial output dropped 2 percent. July’s print was upwardly revised to 6.7 percent from the prior 6 percent.

Stripping biomedical, manufacturing output rose 3 percent on a year-on-year basis and dropped 3.4 percent sequentially. However, the manufacturing growth base in August last year was comparatively elevated at 19.5 percent year-on-year. Regional growth and PMI indicators also imply some moderate easing of momentum in the second half of 2018 versus the first half of 2018.

Also, the ongoing U.S.-China trade war headlines are probably slowly eroding business and consumer sentiment as well. Accounting for the latest print, industrial production in Singapore rose 9.2 percent year-on-year in the initial eight months of 2018, down from 11.8 percent year-on-year seen in the same period of 2017.

Growth in nearly all clusters saw a slowdown from July’s on-year print. Electronics output decelerating to 3.6 percent year-on-year, marking the slowest growth since February 2016. While the cluster’s growth was linked to other electronic modules & components and semiconductors segment, falls in other electronic-related indicators dragged the overall output in electronics, noted Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

The recent industrial print strengthens the domestic manufacturing slowdown theme, although the possibility for some possible short-term realignment of production chains as a natural response to the ongoing U.S.-China tariffs. There are some similar signs with the industrial production print and last week’s NODX growth print: the recent non-domestic export print in August has also reflected nine straight months of contraction in the electronic export space, in the midst of further deceleration in pharmaceutical exports that rose 33.4 percent year-on-year in August.

“With industrial production seeing a high base in September-October 2017 (14.6 percent and 15.3 percent yoy respectively), there remains a risk for industrial production growth to slow further into the next two months. As such, our view for Singapore 3Q18 GDP and manufacturing growth to print 2.3 percent yoy and 3.9 percent yoy are intact”, added Selena Ling.