Why Singapore's September industrial production index could disappoint

It could fall short of the 7% growth forecast.

According to DBS, the industrial production index for Sep13 due today will provide a clearer picture on whether a revision in the advance GDP estimates is on the cards. DBS expects the headline number to report a 4.7% YoY expansion. But this will fall short of the implicit assumption of a 7.0% growth in the advance estimates.

Here's more from DBS:

Plainly, the overall GDP estimates for the third quarter are likely to be revised down despite the better than expected outcome.

Market was previously expecting the economy to contract by 4.0% QoQ saar (3.8% YoY) versus the official projection of -1.0% QoQ saar (5.1% YoY).

The final outcome will turn out to be somewhere in between because the manufacturing sector could possibly disappoint in September judging from the recent export performance.

Headline NODX slipped by 1.2% YoY with poor showings from both key electronics and pharmaceutical clusters. But the saving grace is that the petrochemical cluster saw export sales up by 35.3% YoY.

Increased capacity in the petrochemical industry probably has led to this strong showing. Indeed, the petrochemical cluster could provide some imputes to growth in the manufacturing but probably not much as this cluster accounts for a relatively small share of the manufacturing sector.

Though officials are optimistic about the manufacturing growth in the third quarter judging from the advance GDP figures, the odds are not in their favour. In short, you have to take the advance GDP estimates with a pinch of salt.