The Republic's Q4 and full-year GDP estimates look set to be revised higher than most expected, after the manufacturing sector grew by a surprising 6.2 per cent in December from a year ago. But the volatility and large revisions to official data are giving economists pause.
The unexpected rise in industrial production was largely due to double-digit jumps in electronics (22.2 per cent) and transport engineering (13.8 per cent) output, which helped offset a 14.9 per cent contraction in the biomedical manufacturing cluster.
Excluding the volatile biomedical sector, industrial production would have grown an even stronger 12.1 per cent year-on-year.
The data came as a "massive surprise" to the 14 private-sector economists polled by Bloomberg before the Economic Development Board (EDB) released the numbers yesterday. They had been expecting industrial production to ease from the previous year, forecasting a 1.4 per cent contraction in December's manufacturing output.
Said DBS economist Irvin Seah: "(On an) absolute index basis, this is the highest level of industrial output since March 2008 . . . Manufacturing growth for the fourth quarter will now be revised to 7 per cent year-on-year instead of 3.5 per cent as previously reported in the advance estimate."
Economists surveyed by The Business Times believe that upgrades to Q4 and full-year GDP estimates - released by the Ministry of Trade and Industry (MTI) earlier this month - are in order.
DBS, CIMB and UOB economists now expect Q4 GDP to fall within the 5.3-5.5 per cent range, while ANZ's Daniel Wilson thinks growth will hit 6.8 per cent - far above MTI's advanced estimate of 4.4 per cent year-on-year growth in the final quarter of last year.
Instead of dipping a seasonally adjusted, annualised 2.7 per cent from Q3, most economists say the economy will escape an outright contraction in Q4 and instead record at least flat, if not positive, growth.
As for full-year GDP numbers, economists from Barclays, DBS, and UOB say the Republic's 2013 GDP growth will be closer to 4 per cent - higher than the government's advanced estimate of 3.7 per cent.
But economists' upgraded GDP forecasts were not solely the result of December's surprise showing in manufacturing output. "We're all re-thinking our numbers not just because of December's figures, but also because November's data has been upgraded quite a bit," said UOB economist Francis Tan.
According to EDB, industrial production in November grew 6.6 per cent over the previous year, instead of an earlier estimated 4 per cent.
Some economists BT spoke to expressed surprise at November's "significant" upward revision in manufacturing output.
Said DBS's Mr Seah: "We've seen quite a few instances where negative advanced estimates turn positive when the final data is released, and vice versa. It's true that Singapore is a small and open economy, but such massive gyrations do call into question issues of data accuracy, especially when it comes to data-collection procedures."
In terms of December's industrial production data, Barclays economist Joey Chew and UOB's Mr Tan said that while economists had already priced in a continued strong performance in the tech cluster, the extent of the electronics industry's rebound was somewhat unexpected.
All sub-clusters put up a strong showing, with output for the main semiconductors segment rising 25.7 per cent year-on-year in December, while the data storage segment grew 32 per cent. This was due in part to the low base in December 2012, when electronics demand was weak.
The transport engineering cluster received its boost from a 19.8 per cent output growth in the marine and offshore engineering segment.
CIMB economist Song Seng Wun said: "The late spikes in transport engineering, chemicals and tech boosted December industrial production to 5.2 per cent in month-on-month seasonally adjusted (terms) - the strongest month-on-month increase in the past 10 months."
Excluding biomedical manufacturing, output would have grown 5 per cent, EDB said.
These numbers, too, caught economists off-guard and surpassed their forecast for a 0.5 per cent rise in seasonally adjusted month-on-month terms.
With a strengthening US economy, an improvement in semiconductor sales in Europe and the recent uptrend seen in manufacturing activities among Asian economies, economists such as Ms Chew and Mr Tan believe positive spillovers to Singapore's manufacturing sector will continue to provide some lift going forward.
"That said, we do (warn of) the potential negative issues that may come from the supply side of production, such as the escalation of labour costs - due to the tight labour market and higher foreign worker levies - and higher industrial rental costs," added Mr Tan.