Analysts predict industrial production to shrink 3.8%

After 2 months of growth.

According to DBS, industrial production (June) due today will likely disappoint. A contraction of 3.8% YoY has been penciled into forecast.

That is, after two consecutive months of expansion – output grew 5.0% in Apr13, followed by 2.1% in May - production is expected to fall back to reality.

Here's more from DBS:

A bit of base effect has probably created some technical drag but key pharmaceutical cluster is currently on a cyclical downswing, judging from the recent NODX sales.

Moreover, production output from the electronics cluster is expected to be subdued. Latest PMI showed that the new orders and import sub-indices have eased off, suggesting anticipated tapering off in demand ahead.

Inventory levels appear to have peaked while the stocks of finished goods are rising, essentially pointing to slower production in the coming months and probably the end of the earlier restocking.

Global outlook is not picking up as quickly anticipated. The US recovery remains mixed while Europe is still in recession. China is going through an internal consolidation, which could spill over to the rest of Asia. And the effect is expected to be manifested in the headline industrial production index for the month.

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