3 good news for Singapore's industrial production

There's a silver lining amid the 0.6% slip.

According to DBS, there are silver linings in December industrial production numbers. Headline number came in at -0.6% YoY, down from an expansion of 2.9%. This is largely attributed to the sharp decline in electronics production (-16.9% YoY).

However, apart from the fact that this still beats the market expectation of -4.8% YoY, the key point to note is that overall production level has increased by a healthy 5.4% compared to the previous month, suggest a near term cyclical improvement. Indeed, this is the strongest MoM expansion since Dec11.

Pharmaceuticals and transport engineering have led the charge. This points to the cyclical improvement in global outlook, which is in line with the turnaround in industrial and export data in Northeast Asia.

Here's more from DBS:

However, electronics remains the weakest link. As this sector continues to struggle with structural challenges of hollowing out, other concerns such as rising business cost, a strong currency and competition from emerging regional players will continue to weigh down on its performance.

More importantly, this set of numbers will also reinforce the view that the economy will avert a technical recession in the fourth quarter last year.

We expect a modest upward revision to the 4Q12 headline GDP growth figure to 1.3% YoY, up from 1.1% provided by the advance estimates. This implies a quarter-on-quarter improvement to 2.5% QoQ saar, from 1.8% previously.

So, there are three key take-away from this set of figures (1) The electronics sector is not entirely out of the woods (2) A gradual improvement can be expected for the other manufacturing sectors in the coming months (3) The economy will avert a technical recession in 4Q12.

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