Industrial Production surprises to the downside in July – UOB

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

Key Takeaways

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.