Singapore: Weak outlook for the manufacturing sector – UOB

Senior Economist at UOB Group Alvin Liew assesses the latest Industrial Production figures in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) started the year on a weaker footing with a -1.1% m/m SA, -2.7% y/y decline in Jan, from a revised +2.9% m/m, -2.6% y/y in Dec (2022). For the y/y print, it was well worse than Bloomberg’s median forecast of +0.8% y/y but quite close to our forecast of -2.9% y/y. This was the fourth consecutive month of y/y decline and the worst streak since 2015.”

“The Jan IP was weighed lower by sharper declines in chemicals, precision engineering and general manufacturing, while electronics resumed its  decline by -2.9% y/y (after a brief 4.2% rise in Dec). The fall in IP was partly cushioned by biomedical manufacturing which rebounded strongly in Jan by 23.2% y/y thanks mainly to a surprise 37.5% spike in pharmaceutical output and to a less extent, a 3.8% y/y rise in medical technology. And while transport engineering output rose, it slowed further to just 4.7%."

“IP Outlook – Notwithstanding the volatility brought by the biomedical manufacturing component, the latest Jan IP print continues to  affirm our downbeat manufacturing outlook, and we maintain our forecast for Singapore 2023 manufacturing to contract by 5.4% due to the faltering outlook for electronics and weaker external demand.  In comparison, in-person services (excluding trade-related services) could fare better in 2023 due to various  upside growth factors such as the continued recovery in leisure and business air travel and inbound tourism, and the impact of China’s reopening is likely to be positive for these sectors. With the weaker 2023 manufacturing outlook and barring external events (such as escalating war in Europe and a deadlier variant of COVID-19), we keep our modest 2023 GDP growth forecast of 0.7% (closer to the lower end of the official forecast range of 0.5-2.5%).”