Alvin Liew, Economist at UOB Group, reviews the latest Industrial Prodcution results in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) ended 2022 with a surprise 3.2% m/m SA increase in Dec. Nevertheless, this still translated into a contraction of -3.1% y/y in Dec. Excluding the volatile biomedical manufacturing, IP actually expanded by 6.8% m/m, 0.3% y/y in Dec (from a revised -7.0% m/m, -5.8% y/y in Nov).”

“The Dec IP was dragged by weaker biomedical, chemicals, precision engineering and general manufacturing, negating the continued gains in transport and a surprise rebound of electronics output. Indeed, electronics staged a surprise 4.6% y/y rebound, thanks to the key sub-segments of infocomms & consumer electronics and computer peripherals & data storage, while its most essential sub-segment, semiconductors, recorded a much smaller -0.3% y/y fall compared to -14.0% in Nov. However, the semiconductor rebound is likely temporary because of the continued declining trend of Asia-Pacific semiconductor sales.”

“IP Outlook – Taking into account of the Dec IP contraction, Singapore’s manufacturing sector declined by a smaller -2.6% y/y in 4Q 22 (versus the official estimates of -3.0% y/y from the advance estimates released in early Jan 2023), but for the full year, due to further downward revisions in earlier quarters that outweighed the improvements in 4Q, IP actually expanded by a slower pace of 2.5% in 2022, (versus the official estimate of 2.6% made based on advance estimates released on 3 Jan 2023). So even as we estimate a small upward revision to 4Q GDP to 2.3% y/y (from 2.2%), we expect full year GDP could be revised 0.1ppt lower to 3.7% (from 3.8%). We maintain our forecast for Singapore 2023 manufacturing to contract by 5.4% due to the faltering outlook for electronics and weaker external demand, a view that is supported by the declining trend in PMI and the increasing visible cracks in exports’ outlook. 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% unchanged (versus the official forecast range of 0.5-2.5%).”