Singapore: Industrial Production surprises to the downside in July – UOB

Singapore’s Jul industrial production (IP) contracted by markedly less than forecast although that was somewhat offset by Jun’s contraction which was revised deeper. IP contracted by just -0.9% y/y in Jul, better than Bloomberg’s median forecast of -3.8% y/y and our less bearish forecast of -3.6% y/y. However, the Jun IP contraction was revised to a steeper 6.6% y/y (versus the prelim estimate of -4.9% y/y). On a seasonally adjusted sequential basis, IP expanded by 4.1% m/m in Jul (well above Bloomberg estimate of -0.1% and our forecast of -3.1%) while the m/m expansion in Jun was revised to a smaller 3.3% m/m (from the prelim estimate of +5.0%). 

IP Outlook – We are heartened by the surprise back-to-back rebound in semiconductors output and by the re-acceleration of growth in the transport engineering components of aerospace and marine & offshore, giving a relatively benign start to manufacturing for the second half 2023. That said, we still hesitate to call for a turnaround in the electronics downcycle. The volatile biomedical cluster adds further caution to the manufacturing outlook. With IP contracting by -5.8% YTD, we maintain our forecast for Singapore 2023 manufacturing to contract by -5.4%, which implies a tepid recovery profile in 2H. 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 and a pensive manufacturing recovery.