UPDATE 1-Singapore's strong March factory output may trigger Q1 GDP upward revision

Fri Apr 25, 2014 3:29am EDT

* March industrial output +12.1 pct y/y, +6.1 pct m/m

* Output in marine and offshore engineering +45.1 pct y/y

* Robust output suggests Q1 GDP will be revised higher

By Masayuki Kitano

SINGAPORE, April 25 (Reuters) - Singapore's first-quarter growth could be revised higher after data on Friday showed unexpectedly strong industrial output in March, double the pace of market expectations.

Manufacturing output in March surged 12.1 percent from a year earlier, far exceeding expectations in a Reuters poll for growth of 6.3 percent.

Output rose 6.1 percent on a month-on-month, seasonally adjusted basis, quicker than the median forecast of 1.5 percent.

The jump in manufacturing output was stronger than what was implied by the government's advance estimate of first-quarter gross domestic product (GDP) released last week, raising the prospect of an upward revision to January-March GDP.

The strength in industrial production was all the more surprising since it came after the city-state's non-oil domestic exports fell more than expected in March, on declines in shipments to the United States and Europe.

"It was quite strong, it appears to be fairly broad-based, and importantly we saw fairly upbeat sequential growth," said Daniel Wilson, an economist for ANZ in Singapore.

"Our model is pointing towards an upward revision to GDP," he added.

First-quarter GDP could be revised to show growth of around 3.5 percent to 4.0 percent on a quarter-on-quarter, seasonally adjusted and annualised basis, bringing year-on-year growth up to more than 6 percent, Wilson said.

The government's advance estimate of January-March GDP had shown that Singapore's economic growth had slowed to 0.1 percent in the first quarter from the previous quarter on an annualised, seasonally adjusted basis.

On a year-on-year basis, GDP growth eased to 5.1 percent in the first quarter, compared with 5.5 percent growth in the fourth quarter.

First-quarter GDP could be revised up to show growth of 5.8 percent year-on-year and 2.6 percent on a quarter-on-quarter, seasonally adjusted annualised basis, economists for United Overseas Bank said in a research note.

The jump in manufacturing output in March suggests that the manufacturing sector component of GDP expanded by about 10 percent in January-March from a year ago, up from 8 percent growth shown in the advance estimate of GDP, said Francis Tan, an economist for United Overseas Bank.

MARINE AND OFFSHORE ENGINEERING

Helping to drive the surprising strength in industrial production was a surge in output in the marine and offshore engineering segment, which jumped 45.1 percent year-on-year.

The rise came as work on several rig and ship building projects played a part in the jump in output from those sectors, the Singapore Economic Development Board said.

Production of electronics and pharmaceuticals also expanded compared with a year earlier, with output in pharmaceuticals rising 19.4 percent, after 20.5 percent growth in February.

Output in the electronics sector, which accounts for one-third of Singapore's total manufacturing production, rose 8.7 percent from a year earlier, slowing from a 15.2 percent expansion in February.

Manufacturing output will probably continue to hold firm in the coming months, helped by growth in overseas economies, said Tan at United Overseas Bank.

In addition, comparisons against a low base seen from around May to August last year, may help support year-on-year growth in manufacturing output in the next few months, he added.

"I guess the production will still be strong. We may or may not see this kind of double-digit growth rate but it will nevertheless be pretty strong," Tan said. (Reporting by Masayuki Kitano)

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