Singapore factory output eases to 9.8% in September, but Q3 GDP set for upward revision
Output growth for the quarter now stands at 11%, higher than the 7.5% growth assumed in the advanced GDP estimate
SINGAPORE’S third-quarter economic growth is likely to be revised by at least half a percentage point, following better-than-expected factory output in September, economists said.
They are now expecting Q3 gross domestic product growth to hit about 4.6 to 4.8 per cent. Flash estimates of Q3’s GDP last week came in at 4.1 per cent, beating market expectations of a 3.8 per cent growth.
This comes as industrial production rose 9.8 per cent year on year (yoy) last month, data from the Singapore Economic Development Board (EDB) showed on Friday (Oct 25).
Despite easing from August’s surprise jump, which had been revised to 22 per cent yoy, manufacturing output in September still surprised private-sector economists polled by Bloomberg. They were expecting a far more modest 3.6 per cent yoy growth.
“The main upside surprise to the headline print was from the surge in biomedical manufacturing activity, which was the best-performing cluster in September,” said DBS economist Chua Han Teng.
Biomedical manufacturing jumped 62 per cent yoy in September, boosted by a 143.9 per cent expansion in the pharmaceuticals segment. This was due to a different mix of active pharmaceutical ingredients being produced and higher production of biological products, EDB said.
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Excluding the typically volatile biomedical cluster, though, factory output grew just 4.5 per cent yoy.
Barclays regional economist Brian Tan said the biomedical cluster appeared to be staging a recovery from an “unusually weak patch” in the first half of the year.
“We estimate that seasonally adjusted biomedical output burst well above trend levels in September, and will likely experience some pullback in October,” he said. “However, we suspect production will stabilise to more trend levels in Q4.”
Electronics production, which surged a revised 50 per cent yoy in August, slowed to just 1.9 per cent in September. It was dragged mainly by the infocomms and consumer electronics segment, even as the computer peripherals and data storage, as well as semiconductor segment, pulled ahead.
Most other segments also clocked a yoy increase in production last month:
- Precision engineering (14.7 per cent)
- General manufacturing (8.1 per cent)
- Chemicals (3.4 per cent)
Transport engineering was the only sector that shrank in September, with output dipping 1.9 per cent yoy.
On a seasonally adjusted monthly basis, September’s manufacturing output was “largely unchanged” from the previous month, EDB said. Excluding biomedical manufacturing, however, industrial production fell 7.6 per cent.
Economists pointed out that September’s robust performance has brought Q3 output growth to 11 per cent, which is higher than the 7.5 per cent growth assumed in the quarter’s advanced GDP estimate.
Maybank expects the final Q3 GDP growth to come in at 4.6 per cent, while UOB and Barclays are pencilling in 4.8 per cent.
Meanwhile, the electronics recovery remains intact, said Maybank economists Chua Hak Bin and Brian Lee, owing to an improvement in the purchasing managers’ index, even if exports and output appear to have slowed in September.
Even so, they warned of downside risks: “These include an escalation of tariff barriers and a bigger US-China trade war, which could ensue from a Trump election win in November, an escalation of geopolitical conflicts in the Middle East, and a US economic slowdown.”
However, UOB associate economist Jester Koh said further rate cuts by central banks in advanced economies could provide some “countercyclical cushion” to any slowdown in consumption and investment activity.
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