Production to be dented by the Lunar New Year effect: DBS

Industrial production index is seen to have contracted by 0.7% in January.

According to DBS, Industrial production index for Jan12 will reflect the current doldrum that the manufacturing sector is facing.

Here’s more from DBS:

The headline number is likely to register a contraction of 0.7% YoY. Essentially, the external headwinds have been strong on account of the global uncertainties.

Though financial markets have performed fairly well in the last month, underlying fundamental demand has remained weak. The financial markets tend to be more preemptive but in reality, it will take longer for the real economy to show pronounced improvement.

And that has been reflected in the non-oil domestic export figure announced last Friday. The NODX was down by 2.1% YoY and up by just a mere 0.9% MoM sa against the backdrop of weak demand. As such, similar outcome can be expected for the industrial output.

Furthermore, production is expected to be dented by the Lunar New Year effect. Domestic production may have slowed due to knock-on effect from plant shutdowns in key China market during the festive season.

Plainly, there are signs of bottoming-out in the ex-biomedical manufacturing segment. But output growth is still likely to remain fairly sluggish for a couple more months.