Singaporean industrial production performs better than expected in June

Industrial production of Singapore came in above expectations in June. Sequentially, industrial production grew 1.2 percent, as compared with consensus expectations of a fall of 0.8 percent. On a year-on-year basis, industrial production fell 6.9 percent, as compared with consensus expectations of a fall of 8.5 percent. Furthermore, the industrial production data for May was upwardly revised to a fall of 0.1 percent from a fall of 0.7 percent.

However, the 6.9 percent year-on-year fall in manufacturing output is still the worst performance since December 2015. Stripping biomedical manufacturing, output dropped 2.9 percent sequentially, which implied that the rebound in the biomedical cluster was a contributing reason, said Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

Biomedical output rose 5 percent year-on-year in June, but the growth rate has been decelerating from the double-digit growth rate seen in the first quarter of 2019. This is also seen in pharmaceuticals that recorded output rise of 5.3 percent year-on-year in June, underpinned by biological products, although this is still down from May’s 17.8 percent.

Electronics output dropped 18.8 percent year-on-year, marking the fourth consecutive month of contraction and also a deterioration from May’s 10.8 percent year-on-year fall. Softness was recorded throughout all electronics segments, including computer peripherals and semiconductors, with the key exception of data storage which recorded 30 percent year-on-year.

Meanwhile, the jobless rate remained stable at 2.2 percent in the second quarter of 2019. Nevertheless, there are some tentative signs of weakening in hiring intentions – while companies have turned cautious in fresh hiring, nevertheless they are not stepping up retrenchments.

Manufacturing employment also contracted for the third straight quarter, implying that the addition of 3,500 jobs in the third quarter 2018 was a temporary blip and that the ongoing US-China trade and tech war might continue to be a drag on the near-term hiring outlook for this cluster.

“This reinforces our view that any deterioration in the domestic labour market is likely to be relatively restrained as services firms will have to weigh the current growth soft patch against the DRC tightening measures that will kick in from January 2020”, added Selena Ling.