Analysts shudder at Singapore's industrial output prediction

It's feared to dip 0.6%.

According to DBS, industrial output is still shrinking. Headline industrial production growth for May due today will likely register a decline of 0.6% YoY.

Though this is an improvement from a drastic 8.7% contraction in the previous month, it does not provide much comfort to the fact that the sector is still weighed down by weak global demand, cost pressure and competition from regional peers.

Here's more from DBS:

The recovery in the US has remained tepid. Eurozone is not out of its economic quagmire after five years of doldrums. And China’s recent slowdown could have a lasting impact on the prospects of local manufacturers given that this is the largest export market for Singapore.

Plainly, against such a backdrop, the manufacturing sector has struggled over the past three years with sluggish production growth. Labour crunch and rise in production costs amid the restructuring effort have further compounded its woes beyond competition from cheaper regional players.

Outlook for the sector appears dim from both cyclical and structural perspectives.

But there are some glimmers of hope. Manufacturing PMI is finally back in expansion mode in May. The headline number has rebounded by 0.8pt to register 50.2, the first expansion in six months.

The latest set of figures together with the PMIs of key markets, may suggest that the manufacturing sector could be on the mend. Nonetheless, much will still depend on global outlook, which thus far has remained uncertain.