Singapore's industrial production for September fell 4.8% y/y (Aug: -7.1%; Jul: -6.6%), slightly below expectation. On a seasonally adjusted m/m basis, output expanded marginally by 0.4% - negligible to offset the 3.6% m/m contraction in August. Today's release also marked a further sequential contraction in production, after an already lacklustre Q2 (Q3: -2.8% q/q sa; Q2: -3.2%).
Overall, the improvement in IP on a y/y basis was helped by a 26.4% y/y surge in pharmaceutical output. Excluding biomedical production, the IP contraction actually widened to 10.2% y/y (Aug: -8.4%; Jul: -4.9%). Even then, the boost from pharma was due to the low base last year, with production remaining almost unchanged in level terms.
"We believe the prolonged period of sluggish manufacturing activity (especially in electronics), as well as divergent performances between IP and NODX underscore the major issue across the north Asia supply chain - inventory buildup in electronics. We think it may take longer to run down inventories, as noted by one of Singapore's regional competitors", states Barclays.
The slower-than-expected inventory correction may continue to weigh on electronics production, particularly for semiconductors.
"All said, we believe today's print increases the risk of a modest downward revision in Q3 GDP in the final release (on 18 November); we forecast a -0.4% q/q saar", says Barclays.
