Hopes fade as electronics production slumps further

The 7% MoM plunge puts the sustained recovery of the sector in question.

According to DBS, a more pronounced decline has been reported in the electronics segment.
While the year-on-year decline has eased (-9.7% versus -12.3% in April), absolute level of production has fallen further (approx. 6-7% MoM sa) compared to the previous month.

Here’s more from DBS:

Indeed, hope of a sustained recovery in the electronics sector is turning to doubt. The electronics production level is turning sideway and increasingly more downwards. The sustainability of the recovery is undeniably in question now. 

The most recent US SEMI book-to-bill ratio has dipped, signaling possible downsides to the electronics sector and suggesting that the recent improvement in the electronics is merely a cyclical restocking process rather than a true recovery story.

Moreover, PMIs for some key export markets have declined, again pointing to a gloomy picture out there, particularly for the manufacturing sector. Overall, while the pleasant surprise from the pharmaceutical industry has partially erased our earlier concern of a sharp jolt in manufacturing and GDP growth in the second quarter, we do also have to bear in mind that the YoY figure has been largely inflated by base effect.

Earthquake in Japan in about the same period last year has caused a sharp dislocation in global manufacturing supply chain, resulting in an exceptional low base for Singapore’s industrial output.

Industrial production index announced recently came in stronger than expected at 6.6% YoY and 1.8% MoM sa. The pharmaceutical segment led the rebound with a solid 32.8% YoY surge. It appears that after the lull in April due to plants shutting down to switch to different product mixes, production in generally has resumed.

That’s good news for the manufacturing sector but it pays to note that the average production level between April-May is still significantly lower than the average in the first three months of the year. Plainly, the rebound in May is not exceptionally strong.