Singapore’s industrial production (IP) contracted 3.9% y/y (-2.0% m/m SA) in December2017, below consensus expectations of a 0.8% y/y expansion, as well as the revised 5.6%y/y rate in November. This on-year contraction is also the first one since July 2016. Excludingbiomedical manufacturing, output grew 4.5% y/y (-0.7% m/m SA) in December.    The overall slowdown in manufacturing activities in December was similar to that in theprevious month: the moderation in the expansion of the electronics cluster (due to baseeffects) and the contraction in the biomedical manufacturing cluster.    The electronics cluster expanded 4.2% y/y in December, supported by growth in thesemiconductors (+9.0% y/y) and computer peripherals (+6.1% y/y) segments. For thewhole of 2017, this cluster expanded 33.5%.?    Although still clocking in an expansion, this was the first time that the cluster’s expansionfell into the single-digits in 19months, much as we have been warning about the high baseeffects. That said, we are still positive about the expansion in this cluster due to the stillstrong (though slowing) expansion in semiconductor sales in the Asia Pacific.?    Exhibit 1shows the close relationship between Singapore’s semiconductor production andthe Asia Pacific semiconductor sales data. The decline in the growth rate of semiconductorsales in the Asia Pacific region from a peak of 26.6% y/y in April to 2017to the current 17.0%y/y in November signals a similar slowdown in Singapore’s semiconductor production in themonths ahead.

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