Singapore's industrial production slumped 10.8 percent on the year in May on sluggish global demand for semiconductors, following a 6.5 percent dip (revised up from a 6.9 percent fall) in April. The decline was much bigger than the median economist forecast of a 7.1 percent drop. Excluding biomedical manufacturing, output fell at a faster pace of 13.0 percent.

The decrease in production was led by electronics (down 23.0 percent), precision engineering (down 10.5 percent) and chemicals (down 9.5 percent), which together more than offset increases of 28.4 percent in transport engineering and 4.4 percent in biomedical manufacturing. The transport sector was boosted by the aerospace segment due to higher demand for aircraft parts from the US and Europe, as well as more maintenance, repair and overhaul jobs from commercial airlines on the back of increased global air traffic.

On the month, factory output fell 3.9 percent after shrinking 1.6 percent (revised up from a 1.9 percent decline) in April.

Industrial production in May, which in April was down 6.9 percent on the year, is expected to fall 7.1 percent.

The industrial production index measures changes in the volume of industrial production with respect to the base year. The index charts the growth in production of each major industry and of the manufacturing sector. Industrial Production measures the physical output of the nation's factories, mines and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Industrial production provides key industry data for export-dependent economies. It is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Detailed data in the report shows which sectors of the economy are growing and which are not.