Brace yourselves for another disappointing industrial production index

Which sector is the culprit this time?

According to DBS, the industrial production index for Sep12 will probably fall short of expectation.

Here's more from DBS:

Based on the advance GDP estimate for the manufacturing sector growth in the third quarter, a 1.7% YoY rise has been priced in.

But we reckon that the headline number could disappoint with a reading of just 1.4% YoY judging from the poor export performance in the month.

The non-oil domestic exports for Sep12 contracted 3.4 YoY. Sequentially, though export sales did bounce back by 1.6% MoM sa, compared to a drastic 9.1% plunge the month before, it fell short of expectation (consensus: 2.8%).

Electronics export sales have continued to decline while the sales for pharmaceutical products have been lacklustre. The manufacturing sector is definitely not out of the wood yet.

Frankly, with the world still stuck in its economic grief, it’s tough for the sector. Top lines will not see significant improvement in the near term unless global business cycle turns around.

The year end festive season demand may offer some respite but it will be modest. Though the recent slew of government stimulus measures may offer some upsides, it takes time for the effect to trickle through.

For now, manufacturers are going through lean times and that should be manifested in the headline number.

More importantly, if production output growth falls short of expectation, expect the GDP growth for the third quarter to be par down further. As it is, the official estimate is for a contraction of 1.5% QoQ saar.