Why did manufacturing output shrink despite the record-breaking NODX surge?

Here’s the reason for the boggling divergence.

Singapore’s manufacturing sector is a tale of two diverging numbers: on the one hand, non-oil domestic exports (NODX) surged 18.5% year-on-year in March, while industrial production posted a 5.5% year-on-year decline in the same month.

While the numbers might seem mind-boggling, analysts note that there is in fact a very simple explanation behind the divergence.

DBS noted that the surge in export sales was driven by several one-off factors, as well as technical and currency effects. The one-offs included a surge in volatile pharmaceutical exports, one-off spikes in exports of structures of ships and boats, and non-electric engines and motors.

“While export sales of these items were booked when they were shipped out, actual production output could have been recorded a while ago. That is, there is a time lag, depending on product and industry, between the recording of the production and eventual export of these items,” stated DBS.

Maybank Kim Eng added that the surge in shipments reflected earlier orders, while sluggish output suggested inventory buildup and subdued new orders.

“The exceptionally strong NODX shipments in March was more a case of normalisation after the Lunar New Year holidays in February rather than the result of stronger demand growth. Underscoring this point is the contrasting performances between output and exports of Transport Engineering, Biomedical and Electronics,” stated Maybank Kim Eng.