Singapore's manufacturing sector is on a tear

Growth pegged to hit to 9.8%.

Upward revision to the 1Q14 GDP growth figures is on the cards thanks to the manufacturing sector's stronger showing.

DBS noted that industrial output in March surged by 12.1% YoY (6.1% MoM sa). This is about twice the pace predicted by the market and implicit in the advance GDP estimates (about 6.5% YoY). Importantly, this will lead to an upward revision in the manufacturing growth figure for the first quarter to 9.8% YoY, from 8.0% projected previously.

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More importantly, a significant upward revision to the first quarter GDP growth figure is in the making. The manufacturing sector accounts for about 27% of overall GDP. This upward adjustment in the manufacturing sector growth alone will add about 0.5%-pt to the headline GDP growth figure for the first quarter.

Moreover, chance is high for the services sector growth to be revised upward as well. While there have been some volatilities in the financial markets recently, the associated risk level was not of similar magnitude compared to the previous episode. So, it is hard to imagine the services sector, usually the most stable engine in the economy, dipping into contraction when the downside risk was not exactly that significant.