Jagged little pill: Biomed segment drags industrial production by 1.2%

Impressive growth becomes short-lived.

What analysts thought was a stellar uphill climb for industrial production turned out to be a mini pithole no one anticipated. Singapore's industrial production (IP) growth declined to -1.2% y-o-y in September after rising to 4.0% in August (Consensus: -0.8%, Nomura: -1.8%). On a month-on-month seasonally adjusted basis, IP declined by 3.3% after falling 0.4% in August (Consensus: -1.5%; Nomura: -3.3%).

According to Nomura, growth in the volatile biomedical segment plunged to -10.3% y-o-y after rising to 9.5% in August. Excluding this segment, IP still rose 0.5% y-o-y from 2.8% (and 1.2% m-o-m sa from 4.3%).

Electronics IP growth fell back to negative territory (-1.7% y-o-y from 7.0%), joining precision engineering and general manufacturing.

Here's more from Nomura:

Taking into account the latest September figure and revisions to the historical data, the latest set of IP data suggests an upward revision to Q3 GDP is possible. The Q3 GDP advance estimates had shown manufacturing rising just 1.4% y-o-y from 1.5% in Q2, while the latest IP data shows a 1.9% y-o-y rise in Q3.

Assuming no revisions to construction and services growth, we estimate this alone should result in a small upward revision in Q3 headline GDP growth to 2.5% y-o-y from the advance estimate of 2.4% y-o-y.

More broadly, two months of month-on-month expansions in seasonally adjusted IP exbiomed suggests that the manufacturing sector continues to improve. This, together with still elevated core inflation stemming from the tight labour market , continues to support our view that the hurdle for the Monetary Authority of Singapore to change its policy stance remains high.