Singaporean industrial production rises year-on-year in July, manufacturing likely to grow 7 pct in 2018

Singaporean industrial production rose on a year-on-year basis; however, it fell sequentially in July. On a year-on-year basis, industrial production rose 6 percent but fell 1.7 percent month-on-month, marking a deceleration from June’s revised 8 percent year-on-year. Nevertheless, this is better than market consensus of 6 percent. Excluding biomedical manufacturing, output still rose 5.1 percent year-on-year.

The main drivers for year-on-year rise were biomedical manufacturing that rose 10.1 percent, followed by transport engineering that grew 9.6 percent. Markedly, electronics output grew 5.4 percent year-on-year in July, its slowest rate since February 2016, as growth in electronics modules & components, semiconductors and infocomms & consumer electronics segments were weighed down by softness in data storage and computer peripherals segments.

Electronics output growth has weakened from solid double-digit year-on-year growth for the January-May period to single-digit growth in recent months. This was also accompanied by precision engineering output which rose just 3.4 percent year-on-year, as higher production of refrigeration systems, process control equipment and mechanical engineering work was countered by weakness in dies, moulds, tools, jigs & fixture. This indicates towards a possible future slowdown in electronics cluster ahead.

With the high base in July 2017, the 6 percent year-on-year IP reading is actually still a fairly positive beginning to the second half of 2018.

“With industrial production expanding a robust 9.9 percent yoy for the first seven months of this year, this suggests that a full-year manufacturing growth forecast of 7.0 percent yoy is achievable, even as the electronics cluster hands over the driving reins to biomedical cluster for the remaining months of 2018”, stated Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.