URL: www.uob.com.sg/research. Wednesday, 26 April 2017. Flash Notes ... Singapore Company Reg No. 193500026Z. Industry C
Alvin Liew
[email protected] Global Economics & Markets Research Email:
[email protected] URL: www.uob.com.sg/research
Wednesday, 26 April 2017
Flash Notes
Singapore: Strong Electronics Output Powers March Manufacturing
Singapore’s Industrial production grew more than expected at 10.2%y/y in March (beating Bloomberg forecast of +5.8% while February’s expansion was revised lower to 10.2%y/y). This was the 8th consecutive month of y/y expansion. On a seasonally-adjusted m/m basis, manufacturing production increased 5.0%m/m in March (again well above Bloomberg forecast of +0.5%m/m, and more importantly it helped to offset partly the deeper -5.8%m/m decline in Feb).
Output growth was unfortunately not as broad-based as we would have liked in March because it was mainly driven by a 37.7%y/y surge in electronics output (thanks to 54.6%y/y jump in semiconductors segment) with secondary support from precision engineering (+12.8%y/y) and chemicals output (+3.5%y/y), offsetting the -15.6%y/y decline in transport engineering production, which was again dragged by the deepening losses in the sub-segment of marine & offshore engineering (which contracted -30.6%y/y in March) and the smaller decline of -5.1%y/y in general manufacturing output.
Biomedical manufacturing also etched out a small 2%y/y growth in March (after two straight months of double-digit contraction) as the sustained demand for medical devices (+16.7%y/y in March from +19% in Feb) helped offset the -2.5%y/y decline in pharmaceutical output.
Thus, two key segments of Singapore’s manufacturing base are at the opposing ends in their outlook. The electronics segment (27.4% share of Singapore industrial production) is enjoying several months of higher manufacturing activities and inventory accumulation in the semiconductor segment (semiconductor production is currently on a 13-month streak of double digit expansion) while the past 8 months of expansion in the new export orders for electronics PMI points to a more sustained pickup in Singapore’s electronics exports at least in 1H 2017. In comparison, the marine & offshore engineering (11.3% share of Singapore industrial production) has been suffering heavy double-digit contractions for most months since March 2015 on the back of anemic rig-building activity and lacklustre demand for oilfield & gasfield equipment. Chances of any significant rebound in this segment remain small, at least in the next 3-6 months.
With today’s release of March IP, manufacturing activities in Singapore grew by 8.0%y/y in 1Q 2017. This is better than the government’s advance estimates of a 6.6%y/y manufacturing expansion as released in the earlier advance 1Q 2017 GDP report (13 Apr 2017). If we assume no major revisions to the services and construction sectors’ 1Q performance, it is therefore very likely that Singapore’s 1Q2017 GDP growth could be revised higher to 2.7-2.8%, instead of the 2.5%y/y advance estimate. The final 1Q 2017 GDP report will be released between 19 and 29 May 2017.
We continue to be hopeful that the strong manufacturing performance may be sustained into the rest of the year and support Singapore’s overall GDP. That said, we also need to acknowledge protectionist & antiglobalization sentiment from the developed world could still translate into measures and policies that will be detrimental to global trade and that may eventually impact negatively a trade-dependent economy like Singapore. With the uncertainties still hovering in the horizon, we maintain our Singapore forecast for 2017 industrial production growth at 2.2% while our full-year GDP growth will remain at 2.4% in 2017 despite the slight upward revision to growth in 1Q.
Growth (% y/y) Industry Cluster Electronics Semiconductors Biomedical Manufacturing Pharmaceuticals Chemicals Precision Engineering Transport Engineering General Manufacturing Total Manufacturing Manufacturing Excluding Biomedical Source: EDB
Weight (2016) 27.4 17.0 19.6 15.0 9.3 13.8 17.6 12.3 100 80.4
Jan-17
Feb-17
Mar-17
Jan-Mar 17
22.7 35.9 -12.7 -17.2 3.4 22.0 -6.7 -15.7 3.9 8.9
40.3 64.1 -12.6 -21.6 1.9 26.0 -10.9 2.5 10.2 16.8
37.7 54.6 2.0 -2.5 3.5 12.8 -15.6 -5.1 10.2 12.4
33.1 50.3 -7.5 -13.5 2.9 19.4 -11.3 -6.7 8.0 12.6
Please click on the link to access the Singapore Monthly Manufacturing Performance for March 2017 Report
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