Singapore's manufacturing output forecast to grow 4% in 2017

Partly because of stabilising economic growth in China.

Singapore’s Industrial Production Index (IPI) rose 12.6% year-on-year in February, surging from a 3.8% rise the month before. The acceleration in growth was driven by semiconductors yet again, but there are signs that growth is broadening into supporting sectors like precision engineering and petrochemicals, according to RHB.

The island’s IPI grew 7.9% yoy in 2M17, moderating from +11.7% in 4Q16. Nevertheless, going forward, RHB envisages manufacturing activities to be higher over the course of the year and maintain its projection for manufacturing output to grow 4% in 2017, picking up from +3.6% last year, underpinned by:

i. Higher external demand led by firming US economic growth and potential fiscal stimulus from G3 nations;
ii. Improving growth in ASEAN economies, supported by higher commodity prices;
iii. Stabilising economic growth in China;
iv. Slightly improved domestic consumption.

Here’s more from RHB:

Electronics output rose 39.8% yoy in February, picking up from a 22.2% gain the month before. Semiconductor production grew 63.6% yoy, after rising 35.7% in January. Meanwhile, production of data storage and computer peripherals contracted, capping some of the upside.

Things were further improved as activity in the precision engineering and general manufacturing clusters advanced 26.2% and 3.3% yoy in February, compared to readings of +22.2% and -15.8% respectively the month before, suggesting that there are legs to this rally. Meanwhile, the transport engineering cluster declined at a quicker pace of 9.6% yoy, from -6.4% in January. Aerospace engineering demand slowed sharply to +3.3% yoy in February, from +27.3% the month before.

Meanwhile, the marine & offshore engineering segment contracted at a slower pace but remained weak nonetheless, reflecting a lower level of rig building activity and lacklustre demand for oilfield & gasfield equipment amidst the backdrop of the low oil price environment.

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