Singapore: Manufacturing outlook remains weak – UOB

Singapore’s industrial production (IP) again contracted more than forecast in May, affirming the weak manufacturing outlook. IP contracted by -3.9% m/m, 10.8% y/y in May, worse than Bloomberg’s median forecast of +2.6% m/m, -7.3% y/y but slightly closer to our forecasts of -1.0% m/m SA, -11.1% y/y. Meanwhile, the Apr IP was revised higher to -1.6% m/m, -6.5% y/y (versus the prelim estimates of -1.9% m/m, -6.9% y/y).  This was the eighth consecutive month of y/y decline, the deepest contraction in the current downcycle, and marked the worst streak since 2015 (11 months of y/y declines). 

IP Outlook – While we continue to be heartened by the re-accelerating growth in the transport engineering components of aerospace and marine & offshore, the latest May IP print also affirms our downbeat manufacturing outlook due to the worsening electronics downcycle and weaker external demand, and it has yet to find a bottom in the current cycle yet. We maintain our forecast for Singapore 2023 manufacturing to contract by 5.4%. We still expect Singapore’s full year GDP growth at 0.7% in 2023 (lower end of the official growth forecast range) reflecting our more cautious external outlook. We reiterate our view that there is a substantial risk for Singapore to enter a technical recession in 1H 2023, largely driven by the weakness in manufacturing.