Singapore: April Industrial Production

Singapore's April industrial production surprised the market by contracting its most in 10 months, dropping 5.7% y/y (Mkt: 6%, UOB: 3.2%), after the revised 12.7% y/y growth in 1Q08. This was due to both biomedical and electronics output contracting in the same month, and came after 1Q08 GDP growth figures were revised down to 6.7% y/y, from 7.2% y/y in earlier estimates. While the headline figure appeared much weaker than expected, we note that most of it was due to the month-to-month output fluctuation in the pharmaceutical sector. April drug output shrank 27.9% y/y, after surging 112.7% y/y in March - but on a 3-month moving average basis, pharmaceutical output still expanded 31.2% y/y in April, from 53% y/y in March. Pharmaceutical production is prone to volatile swings month to month, as drug factories periodically shut down their plants for cleaning prior to a change in product mix. Adjusted for seasonal factors, April IP declined 16.2% m/m, from the revised 0.4% increase in March (Mkt: -5.5%, UOB:-7%), which is largely payback for the strong expansion in factory output in the first 2 months of the year.