Drop in drug output to sharply drag Singapore's April industrial production

IP is predicted at a measly 3.4%.

Everyone's being warned about a looming bad news in Singapore's April industrial production number as the benefits of the one-off spike in last month's pharma output and OM engineering sector wear away.

According to DBS, industrial production is expected to soften in April. The headline number is likely to report a significantly slower pace of expansion from last month’s strong showing.

Here's more from DBS:

We have a forecast of 3.4% YoY penciled in, which is less than onethird the pace of 12.1% in Mar14. So why the sharp moderation when global economic conditions appear fairly stable?

Well, the strong showing in IP over the last 1-2 months were driven by the pickup in pharmaceutical output (+19.4%) and a sharp spike in offshore marine engineering cluster (+45.1%) due to a one-off delivery of oil bunkers. Both are not sustainable.

IP will ease when these one-off factors dissipate. We expect that to happen in April, which will lead to moderation in the headline number.

Moreover, electronics production has been lukewarm. The SEMI book-to-bill ratio and recent electronics PMI readings are hinting of moderation in production activity. Manufacturers appear to be recalibrating their production pace to cater for a slightly softer demand ahead. With these in mind, IP growth is expected to stay within the low single growth range in the second quarter after two consecutive months of double digit growth.

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