* Dec industrial output +6.2 pct y/y (Reuters poll -0.4 pct)
* Economists say Q4 GDP could be revised up from advance
* Output outshines exports in 2013, suggesting possible
(Adds December industrial output figures, comments on GDP)
By Masayuki Kitano
SINGAPORE, Jan 24 Singapore's factories may be
in for a rougher ride this year if manufacturers ramped up
output in anticipation of a pick-up in global demand, and caused
stocks to swell.
That worry is underscored by the city-state's firm
industrial output growth, with the final month of 2013 blowing
past expectations, which contrasts with weakness in exports over
If electronics and other goods have been built up in
warehouses, analysts say it raises the risk of an inventory
adjustment that may temporarily weigh on industrial production
in the trade-reliant economy.
But a surprise 6.2 percent jump in December output from a
year earlier, against expectations for a fall, was seen
bolstering fourth-quarter growth.
"I wouldn't be surprised to see a positive number," said
Michael Wan, an economist for Credit Suisse. Advanced fourth
quarter GDP shrank a seasonally adjusted and annualised 2.7
percent from the previous quarter.
Song Seng Wun, an economist for CIMB, said fourth-quarter
GDP could be revised to growth of 5.4 percent year-on-year from
the advance estimate of 4.4 percent, assuming that there were no
changes to sectors other than manufacturing.
Singapore's manufacturing sector is anchored by electronics
and pharmaceuticals but has lagged the rest of the region in
recent years as the economy has become increasingly reliant on
trade, financial services, tourism and property development.
The divergence between output and exports widened last year
as total manufacturing output expanded while non-oil domestic
exports fell. The gap has been more obvious in the electronics
sector, which accounts for a third of Singapore's output.
In the electronics sector, total production in
January-November 2013 rose 1.8 percent from the same period a
year earlier, according to the Singapore Economic Development
But total domestic electronics exports in the first 11
months of 2013 slid 11.9 percent year-on-year, International
Enterprise Singapore data shows.
Inventories have increased in each of the first three
quarters of 2013 within the city-state's economy as a whole,
according to gross domestic product data.
"Starting from the latter half of 2012 until recently, I
think there has been a quite a bit of inventory build-up on a
macro basis," said Hayato Nakamura, Singapore-based senior
economist for Bank of Tokyo-Mitsubishi UFJ.
The Singapore Institute of Purchasing & Materials
Management's purchasing managers' index (PMI) shows that
electronics inventories expanded during much of 2013.
To be sure, economists including Nakamura say that a
build-up of inventories is just one of the possible factors
behind the divergence in output and exports.
The data is also a bit patchy.
The PMI survey shows that stocks of finished goods in the
electronics sector have contracted for months, and the GDP data
can reflect changes in inventories in the non-manufacturing
sector as well as among manufacturers.
Another reason for the gap may be a drop in the prices of
exported goods that thus caused a fall in nominal exports, which
are measured at current prices.
But not all agree that weak prices explain the disparity
between the firmness of output and the weakness of exports.
"If you check semiconductor chip prices, it's not as if they
are collapsing or anything," said Chua Hak Bin, Singapore-based
economist for Bank of America Merrill Lynch. "To me, it's
probably the inventory argument."
One pocket of strength in output has been semiconductor
production, which alone accounts for 20 percent of the
city-state's total manufacturing output.
Asked if an inventory build-up in the chip industry may have
been a factor behind the output/export gap, Russell Tham,
regional president, South East Asia for top chip gear-maker
Applied Materials Inc, said Singapore is not a place
where firms tend to keep a lot of their inventory.
"We don't have a large domestic market, so I don't think the
inventory stacks around here," Tham said.
Jagadish C.V., chief executive officer for Singapore-based
semiconductor manufacturer Systems on Silicon Manufacturing Co
Pte Ltd, said there was likely some typical year-end
accumulation of inventory among semiconductor firms in Singapore
in the fourth quarter of 2013.
"I would say 2014, maybe in general in Singapore for the
semiconductor industry, quarter one may be a little bit flat or
slower," said Jagadish, adding that semiconductor production was
likely to turn stronger later in 2014.
If an inventory build-up has taken place, that could weigh
on output, especially if global growth disappoints. It could be
a risk factor for the general view among economists, who expect
growth in Singapore's manufacturing sector to accelerate in
(Additional reporting by Brian Leonal and Rujun Shen; Editing
by Jacqueline Wong)