Don’t be fooled by strong pharmaceutical export sales: DBS

It may have increased 38.6%, but DBS says this is purely numerical as the rest of the manufacturing sector is still in a slump.

According to DBS, local manufacturers will have to brace themselves for a winter before spring arrives in the second half of the year.

Here’s more from DBS:

Market will have something to cheer about, at least from a numerical perspective when the industrial production index is announced this Thursday. Overall industrial output is expected to expand by 10.5% YoY in December on account of the strong rebound from pharmaceutical production.

Indeed, latest NODX figure has surprised on the upside with a solid 9.0% YoY (16.4% MoM sa) expansion. Pharmaceutical export sales are once again in the driving seat after a brief slump in November.

Sales were up by 38.6% YoY or about 27% compared to the previous month. And if overall industrial output does coming in strongly, an upward revision in the headline GDP growth figures (3.6% YoY, -4.9% QoQ saar based on the advance GDP estimates) is on the cards.

But this is purely numerical. The boost from the pharmaceutical segment has masked the downside risks facing the manufacturing sector. While the drug sector can grow by leaps and bounce, the rest of the manufacturing sector is in a slump.

Demand from the developed economies has been sluggish while Asia is also cooling. As long as global uncertainties continue to linger, manufacturing output will be affected. In this regards, local manufacturers will have to brace themselves for a winter before spring arrives in the second half of the year.