Quick takes: Stunning Dec PMI shows positive turn, but anti-trade policies worrisome

SINGAPORE'S manufacturing output in December surged 21.3 per cent from a year ago, posting its best monthly performance in more than two years, data from the Economic Development Board showed on Thursday.

This jump was double what most analysts were expecting. A Reuters poll put the median forecast at 9.5 per cent year-on-year.

Excluding the volatile biomedical sector, output still increased by 16.1 per cent.

Here are some economists' comments:

Ng Weiwen, ANZ:

"Dec industrial production surprised significantly to the upside, up 21.3 per cent from 11.8 per cent in the preceding month. Growth was broad based, largely driven by electronics +49.4 per cent year-on-year, pharmaceuticals output +53.8 per cent year-on-year and petrochemicals +18.4 per cent year-on-year.

"Is this sustainable? Given the slew of strong PMI readings globally, the inventory cycle has likely turned strongly positive, providing an important boost/fillip to global production as reflected in today's strong IP print.

"Recovery in commodity prices will lend support to petrochemical production but the sustainability of electronics production will hinge on the global capex cycle. Biomed will remain the wild card.

"So today's print was a confluence of tailwinds from these 3 clusters and lends credence to the strong Q4 advance GDP estimate of 1.8 per cent year-on-year."

Francis Tan, UOB:

"No doubt that part of the reason for the large improvement was due to a low base in December 2015, the highlight remains in the strong activities in the electronics and biomedical manufacturing clusters. All the other clusters, except for the transport engineering cluster, expanded in the same month.

"The electronics cluster continued to fire up its machinery and registered its 10th consecutive month of on-year expansion in December with output jumping 49.4 per cent year-on-year, mainly due to the robust expansion in the semiconductor segment (+94.0 per cent year-on-year).

"As a note, the semiconductor segment had grown at double-digit rates over the past 10 consecutive months already, signaling a consistent pickup of demand, and not just a low base effect. For the full year, this cluster expanded 15.9 per cent.

"The output of the biomedical manufacturing cluster also grew at a stellar 44.9 per cent year-on-year, on the back of a 53.8 per cent year-on-year rise in the pharmaceuticals segments as well as a 19.0 per cent year-on-year growth in the medical technology segment. For the full year, this cluster gained 13.6 per cent.

"Clearly, Singapore's manufacturing activities were pulled up by the consistent improvement in the electronics and biomedical manufacturing clusters (44.4 per cent of total manufacturing) in 2016. The momentum should continue well into the 1st half of 2017, and slowdown in the 2nd half due in part to base effects. We need to be watchful of the anti-globalisation antics from the developed world such as the US and EU, especially since the Trump administration may start implementing import tariffs on goods from China (where Singapore exports a lot to). With the uncertainties in the horizon, we maintain our forecast for 2017 industrial production to grow 2.2 per cent."