Industrial production beats forecasts on AI-driven chip demand

UOB said structural AI tailwinds may offset petrochemical disruptions from the Middle East conflict.

Industrial production outperformed expectations in April 2026, supported by strong semiconductor output and resilient AI-related demand, according to UOB.

Industrial production rose 5.8% MoM on a seasonally adjusted basis and 17.6% YoY in April. This exceeded Bloomberg's estimates of 1.9% MoM growth and 12.0% YoY growth.

UOB said the outperformance was anchored by semiconductors, which grew 12.9% MoM, reflecting continued demand linked to artificial intelligence.

Transport engineering was another bright spot, rising 10.2% MoM. The increase was driven by gains in marine and offshore engineering, as well as aerospace, which continued to benefit from maintenance, repair, and overhaul activity from commercial airlines.

However, biomedical output weakened, weighed down by declines in pharmaceuticals and medical technology.

Petroleum and petrochemicals also remained under pressure. UOB said the fallout from the Middle East conflict continued to deepen, with petrol output falling 15.3% MoM and petrochemicals declining 8.9%.

The bank said several refineries and petrochemical companies in Asia have cut runs, with some declaring force majeure, due to sustained cargo disruptions through the Strait of Hormuz and earlier infrastructure damage.

UOB said the strong April reading supports its upgraded 2026 GDP growth forecast of 3.2%, from 2.5% previously. It expects AI-related tailwinds to continue supporting growth in the second quarter and possibly the third quarter, likely offsetting the drag from energy and petrochemical supply disruptions.

However, UOB warned that risks remain tilted to the downside. Material disruptions to critical semiconductor inputs such as helium, bromine, and sulfur could slow regional semiconductor production.

The bank also said hyperscalers and technology companies may delay new data centre development and AI-related capital expenditure if energy constraints intensify, with potential knock-on effects on financial markets.

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