Singapore’s industrial production surges 14% in December

A 7.3% full-year industrial production growth rate in 2020 was an impressive result despite headwinds from the Covid-19 pandemic. Sustaining this performance in 2021 hinges on the pandemic abating and a continued positive semiconductor cycle. We're not expecting much in terms of policy support

In this article

Manufacturing roars ahead Electronics up, pharma down Upward 4Q20 growth revision What’s in store in 2021?

14.3%

Singapore December IP growth

year-on-year

Better than expected

Manufacturing roars ahead

Singapore's industrial production staged another month of strong growth in December, surging by 14.3% year-on-year. This comes on top of an 18.7% jump recorded in November, which was revised higher from the 17.9% initial reading. A 2.4% month-on-month (seasonally adjusted) IP growth followed a 7.5% growth in the previous month.

The report was better than our estimate of 13% YoY industrial production growth which was derived from manufacturing growth in the initial 4Q GDP estimate released earlier in January. It also beats the +6.8% YoY non-oil domestic export (NODX) growth in December.

Electronics up, pharma down

The electronics' sector was the star performer, with a 41.8% YoY surge. And there's also more evidence of a positive global semiconductor cycle which appears to be in full swing with a 51% YoY bounce there

Balancing that were pharmaceutical, petroleum, communication, and transport sectors – all posting large year-on-year output contractions in December. A -23% YoY plunge in pharmaceuticals was a sharp negative swing from a 51% bounce in November, which could just be a blip given that the sector remains a disproportionate beneficiary of the pandemic.

Upward 4Q20 growth revision

Year-on-year IP growth is closely correlated with manufacturing GDP growth, which according to the advance 4Q GDP estimate was +9.5% YoY. However, today’s release brings 4Q IP growth of 10.3% YoY, which suggests the advance headline GDP growth number for the last quarter, -3.8% YoY, is prone to upward revision.

Assuming everything else remains constant, we estimate a slight upward GDP revision to –3.7% YoY. The final estimate is out in mid-February.

What’s in store in 2021?

A 7.3% full-year growth target in 2020 sets the manufacturing sector for outperformance in 2021. However, we're still cautious as Covid-19 maintains its rapid spread globally, while the vaccination drive has yet to gain full speed. This could mean continued sluggish global demand for Singapore’s exports. Hope of a strong bounce back this year also rests on the positive semiconductor cycle keeping its current momentum.

Macro policy should remain accommodative, though we would imagine 2021 to be more a normal year for policy after a record stimulus in the last year 2020. We don’t anticipate a significant policy boost coming from the FY2021-22 Budget scheduled on 16 February, nor any change to the Monetary Authority of Singapore’s zero SGD-NEER appreciation policy path throughout the year.

That said, Singapore’s should see an above-trend GDP growth this year, partly lifted by a low base year effect. Our GDP growth forecast for 2021 is 3.8%.

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