Industrial production jumped 12.1% in March

It beat market's forecast.

According to UOB Economic-Treasury Research, Singapore’s industrial production (IP) grew 12.1% y/y (6.1% m/m SA) in March, surprising consensus estimates of a smaller 6.4% y/y growth.

Here's more:

Both the healthy recovery in global economic conditions and a low base in production for the same month a year ago (where IP declined 3.6% y/y in Mar 2013) boosted this month’s manufacturing numbers. Ex-biomedical manufacturing, IP grew 10.9% y/y (1.6% m/m SA).

Similar to what we saw in February, manufacturing activity in March expanded across all clusters. Particularly, strong contributions came from the transport engineering (+29.4% y/y), biomedical manufacturing (+16.4% y/y), electronics (+8.7% y/y), and chemicals (+5.2% y/y) clusters.

With March’s industrial production number coming in quite strongly, we continue to maintain our forecast of a 5.0% expansion (versus 1.7% growth in 2013) in Singapore’s manufacturing activity this year.

1Q industrial production grew at an average of 9.8% y/y, stronger than the 8% y/y estimated by the during the GDP advance estimates report on 14th Apr. This could lead to potential upside to 1Q GDP numbers and we estimate 1Q GDP to grow 5.8% y/y (2.6% q/q SAAR), better than the government’s estimate of 5.1% y/y.

In the coming months, better economic growth outlook in G3 economies and the uptrend seen in manufacturing activities among Asian economies during recent months will continue to boost manufacturers’ business volumes.

A word of caution though, as the still-tight labour market condition and the upcoming foreign worker levy hikes will likely increase business costs and squeeze on the profit margins of our manufacturers.