Singapore industrial production finally recovers after two disappointing months

IPI rose by 6.6% in May, thanks to the pharmaceuticals and transport engineering segments.

According to DMG-OSK, after disappointing in the previous two months, IPI recovered to rise by 6.6% yoy in May as we had expected. This was however better than the 6.1% the market was expecting.

Here's more from DMG:

Lifting manufacturing higher in May was the rebound in pharmaceuticals and favorable base effects. Excluding biomedical manufacturing, IPI was higher by 2.0%, the second consecutive month of expansion.

Besides the volatile pharmaceuticals segment, which expanded by 39.1% yoy in May after declining in the past two months, support for IPI growth also came from transport engineering (up 35.4% yoy from Apr’s 30.0%) and general manufacturing (up 3.7% yoy from Apr’s 2.1%).

However, dragging down output in May was electronics, which remained in the doldrums, declining 9.7% yoy, though this was a less severe drop than the previous two months. Also down were chemicals (May: -4.1% yoy vs. Apr: +1.0%) and precision engineering (May: -0.4% yoy vs. Apr: +2.7%).

So far this year, IPI growth has been patchy and moderate. We continue to expect pharmaceuticals do the heavy lifting this year with output in the segment up 16.2% yoy year-to-date. The expected lift from electronics inventory rebuilding has not been forthcoming, but at the same time, did not suggest another slump as producers keep inventories lean in the face of the uncertain global outlook.

The uncertain global outlook stemming from the Eurozone crisis should put a dampener on external demand this year and hence, cap any strength in industrial production. Nevertheless, we still expect the economy to grow by 3.7% yoy in 2Q12, and by 4.0% for the full-year with manufacturing expanding by a moderate 3.3%.