Manufacturing sector is recovering amidst volatility: analysts

But global trade tensions, specifically between the US and China, dampened some of their sentiments.

Analysts raised their economic growth forecasts and said the manufacturing sector is leading to a recovery amidst volatility brought about by the Lunar New Year. Manufacturing output grew 8.9% YoY in February 2018.

“Looking through Lunar New Year volatility, momentum has been gradually recovering in line with our forecast of acceleration in GDP toward 4% QoQ saar this quarter from around half that rate in Q4 last year,” JP Morgan regional Asia economist Benjamin Shatil said.

OCBC Treasury Research and Strategy head Selena Ling also said the 13% growth in January-February marked a healthy start and may present upside risks to both 1Q2018 manufacturing and GDP growth. “We upgrade our 1Q2018 manufacturing growth forecast to 11.5% YoY which should underpin overall GDP growth at 5.1% YoY for 1Q2018 as well,” she added.

Ling, however, is not keeping her hopes high up. “The current escalation of global trade tensions, specifically between the US and China, may present to be dampening factors on any near-term optimism that may arise from the manufacturing data,” she added.

Shatil also expects overall production momentum to reach a plateau in coming months, in line with other regional exporters. “The sustained broadening of the recovery across sectors will be an important factor in supporting domestic demand, reducing slack, and guiding policy tighter at the April review,” he added.