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UOB Group’s Economist Barnabas Gan assesses the recent figures for the manufacturing sector in Singapore.

Key Quotes

“Singapore’s industrial production expanded 8.6% y/y (+4.6% m/m sa) in January 2021, and surprising market estimates for a milder expansion of 3.6% y/y (+4.3% m/msa). Excluding biomedical manufacturing, industrial production rose 12.1% y/y. Note that December’s industrial production has been upgraded to +16.2% y/y (+1.4% m/m sa), up from the previous print of +14.3% y/y (+2.4% m/m sa).”

“Similar to the previous months, growth was mainly supported by the surge in electronics, chemicals and precision engineering production. On closer investigation, low base levels especially seen in electronics and chemicals may have lent further strength to January 2021’s growth prints.”

“In the year ahead, we continue to expect further growth in the electronic cluster, on the back of support for digital solutions (adoption of 5G technology, cloud computing etc), coupled with continued demand for work-from-home equipment. On the back of an economic recovery in 2021 amid potentially higher oil prices, we think that sectors that had previously seen a full-year contraction could revert to positive growth.”

We keep our manufacturing outlook at +3.0% y/y. The risk to our outlook appears to be balanced; upside risks to our outlook will include a quicker-than-expected rollout of the COVID-19 vaccine, resulting in an accelerated recovery back to pre-COVID-19 levels. On the other hand, uncertainties surrounding COVID-19 amidst the recent rise in geopolitical tensions may inject downside risks to our outlook should these factors exacerbate further.”

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