Singapore’s manufacturing output remains volatile in January-February 2018

Singapore’s manufacturing output continued to be volatile in the initial two months of 2018, growing 4.7 percent sequentially in January but contracting 0.5 percent sequentially in February. This was mainly due to the seasonal impacts from the timing of the Chinese New Year festive season.

On a year-on-year basis, industrial production also decelerated from 16.9 percent year-on-year in January to 8.9 percent in February, but still averaged a strong 13 percent year-on-year for the initial two months of 2018 compared to 7.1 percent year-on-year on year ago. Stripping biomedicals, manufacturing output expanded 9.1 percent year-on-year in February, and 14.4 percent year-on-year for the initial two months of this year.

Widening base of manufacturing growth drivers augurs well for topline growth. The top outperformer in February was again the electronics cluster with 17.4 percent year-on-year growth, which was greatly driven by 26.7 percent in semiconductors even as other segments like infocomms & consumer electronics, data storage and other electronics modules & components fell. Markedly, the January-February growth in the electronics cluster was 23 percent year-on-year.

The Singaporean manufacturing sector is off to quite a healthy beginning with 13 percent growth in January-February and might present upside risks to both the first quarter manufacturing and GDP growth.

“We upgrade our 1Q18 manufacturing growth forecast to 11.5 percent yoy which should underpin overall GDP growth at 5.1 percent yoy for 1Q18 as well. However, the current escalation of global trade tensions, specifically between the US and China, may present to be dampening factors on any near-term optimism that may arise from the manufacturing data”, said Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

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