Singapore industrial production contracted sharply in August, with output falling 10.5 percent on the month after advancing 3.7 percent in July. This is the sharpest decline since February and continues the recent pattern of volatility in output. Previously published PMI survey data, in contrast, showed stronger growth in the aggregate economy in August.

In year-over-year terms, industrial production fell 12.1 percent on the year in August after a fall of 1.1 percent in July. Excluding the biomedical industry, where output is often volatile, year-over-year growth also slumped from an increase of 1.3 percent to a fall of 13.3 percent. This was largely driven by renewed weakness in the electronics sector, with output there dropping 20.0 percent on the year after increasing 5.1 percent previously. Output growth also weakened in the chemicals, precision engineering, and transport engineering industries, partly offset by a smaller year-over-year fall in the general manufacturing and biomedical industries.

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.