Singapore’s IPI Rose by 24.2% Yoy in September

• In Singapore, inflation was flat in September from -0.4% in August, mainly due to the smaller decline in private transport costs.
• Singapore’s industrial production index (IPI) rose for the second consecutive month by 24.2% yoy in September from 15.4% in August
• Thailand’s manufacturing production index dropped to 2.75% yoy due to mainly lower production of cars, petroleum and sugar amid the Covid-19 pandemic

Singapore’s Headline CPI Was Flat in September

Singapore’s headline was flat in September from -0.4% yoy in August due to smaller decline in costs of private transport. Core-inflation, which excludes cost of accommodation and private transport, contracted 0.1% yoy in September from -0.3% in August, attributed to smaller declines in cost of electricity & gas. According to a joint statement by Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI), external and domestic sources of inflation are likely to remain subdued due to weak global demand conditions in key commodity market and the persistence of negative output gaps in Singapore’s major trading partners. Both the headline and core-inflation are projected to average between -1% and 0% in 2020. However, as demand for domestic services gradually picks up, together with disinflationary effects of government subsidies introduced this year, expectation is for Singapore’s core inflation to turn mildly positive in 2021.

Singapore’s industrial production index (IPI) rose for the second consecutive month by 24.2% yoy in September from 15.4% in August. This was boosted by biomedical cluster, such as biomedical, electronics and chemicals clusters. However, growth in IPI was dragged by declines in the output of precision engineering, general manufacturing and transport engineering. We believe the strong increase in industrial production and manufacturing performance will provide some offset for weak domestic demand and services sector in 3Q20, and likely 4Q20. The rebound also reflects a steady post-Covid manufacturing recovery, but second wave of the outbreak across world may impact this export-led recovery. Nevertheless, we believe healthy output in biomedical manufacturing cluster going forward amid higher demand for pharmaceuticals as the pandemic persists in several countries.

Separately, Thailand’s manufacturing production index declined by 2.75% yoy in September (-9.1% in August) due to mainly lower production of cars, petroleum and sugar amid the Covid-19 pandemic. This was the seventeenth consecutive months the index has been in negative territory. Thailand’s Ministry of industry forecasted that the index will contract by 8% - 9% this year. Industrial goods account for 80% of total exports, and remain key driver of Thai’s GDP growth. The weak IPI growth was also in tandem with Thailand’s export growth, where it fell for fifth straight months at -3.9% yoy in September. While manufacturing sector will still be weighed down by softer external demand in 2020, we believe the country’s exports will show some signs of recovery in 2021 due to low base effect and slightly better global economy

Source: Affin Hwang Research - 30 Oct 2020