Singapore's IP recovered in May

Singapore's May IP recovered at a pace close to expectations, with the contraction easing to -2.3% y/y from -9.1% in April (consensus: -2.6%). On a seasonally-adjusted basis, output grew 2.4% m/m, only partly reversing April's 6.6% decline. As expected, the main driver was a rebound in the volatile pharmaceuticals category following April's sharp drop; this offset weakness in chemicals and only a modest recovery in electronics, according to Barclays. 

Indeed, the recent IP outturns mirror the pattern seen in exports, which has seen a structural emergence of non-electronics as the new key export and manufacturing growth drivers for Singapore - rig-building, pharmaceuticals, aerospace and engineering - with the importance of the electronics sector waning. With that said, the electronics sector is likely to benefit from a cyclical rebound, with a recovering Europe augmenting already strong demand from the US, and this should provide further support to manufacturing in the second half, says Barclays in a report on Friday.