Why Singapore IP's 12.8% jump in February didn't impress analysts

Supply risks loom in the horizon.

According to UOB Economic-Treasury Research, Singapore’s Industrial Production (IP) grew 12.8% y/y in February, better than the 4.4% y/y growth seen a month ago. The low base in the same month a year ago (where IP declined 15.5% y/y in Feb 2013) and a steady recovery in global demand saw IP growing at the fastest pace since Jan 2012.

That said, UOB does not think that this robust growth rate can be sustained for the rest of this year and maintain its forecast of a 5.0% expansion (versus 1.7% growth in 2013) for 2014. 

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This implies a more moderate average monthly growth rate of 4.6% y/y in the months to come.

Risks to growth could come from the supply side of production. The labour market remains tight, and in addition to the upcoming foreign worker levy hikes,

rising business costs may eat into the profit margins of manufacturers.