Singapore: Manufacturing outlook remains weak – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest Industrial Production figures in Singapore.

Key Takeaways

Singapore’s industrial production (IP) again contracted more than forecast in May, affirming the weak manufacturing outlook. IP contracted by -3.9% m/m, 10.8% y/y in May, worse than Bloomberg’s median forecast of +2.6% m/m, -7.3% y/y but slightly closer to our forecasts of -1.0% m/m SA, -11.1% y/y. Meanwhile, the Apr IP was revised higher to -1.6% m/m, -6.5% y/y (versus the prelim estimates of -1.9% m/m, -6.9% y/y).  This was the eighth consecutive month of y/y decline, the deepest contraction in the current downcycle, and marked the worst streak since 2015 (11 months of y/y declines). 

IP Outlook – While we continue to be heartened by the re-accelerating growth in the transport engineering components of aerospace and marine & offshore, the latest May IP print also affirms our downbeat manufacturing outlook due to the worsening electronics downcycle and weaker external demand, and it has yet to find a bottom in the current cycle yet. We maintain our forecast for Singapore 2023 manufacturing to contract by 5.4%. We still expect Singapore’s full year GDP growth at 0.7% in 2023 (lower end of the official growth forecast range) reflecting our more cautious external outlook. We reiterate our view that there is a substantial risk for Singapore to enter a technical recession in 1H 2023, largely driven by the weakness in manufacturing.