Analysts fear Singapore's manufacturing output will remain a laggard

Inventory build-up isn't a good sign.

According to Nomura, the official 2013 GDP growth forecast remains 1-3%, which we still see as optimistic.

Manufacturing output will likely remain a drag given signs of an unintended inventory build-up, tight foreign labour policies and a still-subdued external environment.

Here's more from Nomura:

Meanwhile, the pace of increase in financial services looks a one-off and indeed could reverse easily: the press statement mentioned this was partly due to a "sentiment-sensitive segment." We reiterate our 2013 GDP growth forecast of 1.5%.

The start to Q2 was fairly positive, with April industrial production (IP) also surprising on the upside at 4.7% y-o-y from -3.8% in March (Consensus: 1.6%; Nomura: -4.9%).

On a sequential month-on-month seasonally adjusted basis, IP expanded 2.5%, albeit slowing from 6.8% in March. The bulk of the improvement was again led by the volatile biomedical sector.

Excluding biomed, IP growth remained in negative territory in April (-2.7% y-o-y from -8.4% in March). That said, it is an encouraging sign that electronics output increased 1.1% y-o-y from -7.4% in March, the first expansion since April 2011.

However, it remains to be seen whether this improvement will be sustained (see Asia Chart Alert: Singapore: Electronics exports still in a weak spot..., 17 May 2013).