Quick takes: Slower growth in factory output in January due to seasonality effect

OUTPUT by factories in Singapore slowed to a 2.2 per cent growth in January 2017 year-on-year, mainly due to the seasonality effect of Chinese New Year. Excluding biomedical manufacturing, industrial production grew 7 per cent, said Singapore's Economic Development Board on Friday.

Relative to December 2016's 22.1 per cent growth, factory output shrunk a seasonally adjusted 6 per cent in January 2017. With the volatile biomedical manufacturing removed, output fell 1.5 per cent.

Here are some comments from economists:

Ng Weiwen, ANZ:

"To me, I still think there are positive undercurrents for EM (emerging market) Asian manufacturing, with a recovery in global capex mitigating any fading impulse from the latest smartphone cycle. But it will take some time for the official data to confirm whether that is happening.

"Meanwhile, we will put more emphasis than usual on the PMIs, which are usually less affected by Lunar New Year distortions. The regional manufacturing surveys will be out next week."

Francis Tan, UOB:

"We should not be overly-pessimistic when reading the numbers as February's industrial production (IP) could surprise on the upside due to the same seasonality effect. Taking the average of January and February to compare manufacturing's performance will thus be recommended. We are forecasting a 7.2 per cent year on year growth rate in next month's IP. This implies a Jan-Feb growth of 4.5 per cent year on year."

Euben Paracuelles and Brian Tan, Nomura:

"Electronics output growth could rebound in February as the base effect fades, but this will likely remain narrowly fuelled by semiconductors (excluding semiconductors and computer peripherals, other electronics segments declined in January). We also believe the broader economy is still on weak footing and vulnerable to the threat of protectionist policies in the US (see Asia Insights - Singapore: Manufacturing boosts Q4 GDP, Feb 17, 2017)."