Biomedical upsurge triggers manufacturing sector turnaround

It boomed 22.2% in September.

Industrial production rose by 6.7% in September led by the biomedical and electronics clusters, a report by DBS Group Research revealed.

"This is the brightest spot in a long string of poor economic data over the past months," the brokerage firm noted.

Based on the latest figures, the biomedical cluster surged by 22.2% YoY in September. Excluding biomedical, overall manufacturing production posted a slower expansion of 3.5%.

"Ironically, the cluster was the main drag over the past two months as key producers shut down their plants for maintenance and sterilisation of equipment before embarking on the production of new product mix. That had a sharp negative impact on the overall industrial production figure. With production level now back to the norm, expect better IPI showings in the coming few months," the report noted.

The electronics cluster is also having a healthy run. The industry grew by 15.9% YoY in September. DSB pronounced that this could be the initial sign of the US consumers starting to loosen their purse strings.

"Only time will tell but the ongoing recovery in the US labour market will certainly help. Moreover, positive wealth effect from the run-up in China's property market may have also contributed to better electronics exports. For now, things are at least not worsening for manufacturers," it said.

Meanwhile, PMIs of all key markets are beginning to turn north while oil prices, which have been a key drag on the marine engineering cluster over the past 2 years, have also bottomed out. In addition, DBS sees the surge in September IPI will certainly bring about an upward revision in the 3Q16 GDP figures.

"Overall manufacturing growth for the quarter now registered an expansion of 1.3% versus a projected decline of 1.1% in the advance estimates. That should lift headline GDP growth to 1.1% YoY, up from 0.6% in the earlier projection. Sequentially, it will imply a less severe decline of about -2.0% QoQ saar, against the previous estimate of -4.1%.," it stated.

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