Why analysts believe market is 'overly concerned' with Singapore NODX

It contracted 4.6% YoY.

According to DBS, industrial production for May did surprise on the upside, at least from the market’s perspective. The headline number registered a 2.1% YoY (1.2% MoM sa) increase.

Though this is lower than forecast for a 3.3% increase, the final outcome is much stronger than a mere 0.1% increase envisioned by consensus.

Plainly, the market appeared overly concerned with the poor non-oil domestic export performance in the same month.

Here's more from DBS:

The NODX contracted 4.6% YoY and fell 1.1% MoM sa and that probably accounts for the relatively conservative estimates that have been put up.

But as we’ve highlighted previously, May’s NODX was distorted by a mix of base, price and currency effects. That explains why we had placed our bet on the PMIs instead. The latest May PMI figures are in fact showing sustained expansion in production output.

Key manufacturing PMI (May) posted a higher 51.1, which is an increase of 0.8 point over the previous month. Importantly, the overall manufacturing PMI and all the sub-indices are pointing to a broad-based improvement in production output.

Note that the new orders, new export orders, import and employment indices are unanimously suggesting stronger demand ahead. This is in line with the improved sentiment and expectation of a stronger recovery in the global economy, which has also been manifested in this set of industrial production figures.

Barring any major downside surprise in the industrial production index for June and juxtaposed against the anticipated healthy growth performance from the services and construction sectors, GDP growth in the second quarter is expected to be stronger than in the first quarter.