Manufacturing growth lifts 2017 GDP forecasts

But banks are sending warning signals about the sector’s rocky performance.

Singapore's manufacturing growth has turned banks bullish towards the country's GDP for the year.

According to recently released statistics by the Singapore Economic Development Board (EDB), Singapore's total manufacturing output in September rose by 14.6% YoY, bringing manufacturing growth to 18.4% in Q3.

Maybank Kim Eng lifted its Q3 GDP forecast by another leg to +3.4% from +3.2% in 2017, thanks to stronger manufacturing and services growth.

Meanwhile, UOB is expecting an upgrade to the government’s Q3 preliminary estimates to 4.7% YoY, up from 4.6% YoY in the previous advanced estimates.

Maybank Kim Eng said the final 3Q GDP growth is likely to come in at +5.1%, above the government’s earlier flash estimate of +4.6%.

"We think that growth is visibly broadening to services and more domestic-oriented sectors," Maybank Kim Eng analyst Chua Hak Bin said.

The bank forecasts that the Ministry of Trade and Industry (MTI) will likely upgrade its full year GDP growth to 3.0-3.5% from the current 2-3% when the Q3 GDP is finalized.

However, UOB warned that the market shouldn't be too optimistic as some manufacturing clusters, like precision engineering, continue to have a rocky performance and rely on the cyclical increase in the demand for semiconductors.

UOB analyst Francis Tan said, "Although we remain optimistic in the continuing growth for the electronics and precision engineering clusters in 2017, we believe the double-digit growth for semiconductor production may slow into the single digits as we proceed towards the end of the year and onto 2018, due to base effects and a slower 2H capex growth expected in China."