No April Fool's joke: DBS says IPI may rise to 8.9%

The bank cites the rise in NODX and electronics products as reasons why the Industrial production index for April could rise higher than the 4% forecast.

The government is due to announce the figures today.

In a statement, the bank said that it penciled in an 8.9% IPI, while consensus is looking at 4.1% YoY.

"The reason for such optimism despite the current downside risks to global growth stems from two key factors. Firstly, real non-oil domestic exports were up by a healthy 8.7% YoY in April following a decline of 4.1% in March. Sales for both electronics and biomedical products were fairly strong to deliver the healthy export performance.

Secondly, while manufacturing PMI has dipped to contraction zone in April, it was actually still in the expansion (above 50) level in March. Note that the manufacturing PMI typically has a one month lead time against the industrial production index. So as far as April is concerned, production level should still remain strong although the same can’t be said for the subsequent months," the bank said.

DBS Research. however, cautioned investors to monitor the IPI readings for May and June as overall industrial production output is "highly likely" to slump in the said months due to the worsening outlook in the Eurozone and the moderate economic growth in the US.

Asia, too, is increasingly showing some signs of moderation as well, the bank said.

DBS Research forecasts the overall manufacturing growth to pullback in the 2Q12 GDP figures.