Monday, October 8, 2012


SINGAPORE: Singapore's industrial production fell 2.2 per cent on-year in August, faring worse than market expectations of a marginal increase.

Month-on-month, the manufacturing output declined 2.3 per cent, according to the Economic Development Board.

In July, industrial production rose 2.5 per cent on-year and fell by 8.7 per cent on-month.

Some economists said Singapore is likely to slip into a technical recession in the third quarter of this year.

A technical recession refers to two consecutive quarters of GDP contraction.

Weaker global demand for electronics exports continued to put a drag on Singapore's industrial production.

The output for the electronics cluster fell 7.3 per cent on-year in August, compared against the 5.3 per cent drop in the previous month. 

The other poor performer was the transport engineering sector, which saw output slump 20 per cent on-year, reversing the 6 per cent gain in July.

EDB said that is due to a slowdown in demand for engine repair jobs from the US and Europe as well as lower contributions from oil rig projects.

Meanwhile, the biomedical output continued to grow at a slower pace, expanding by 13 per cent on-year in August, led by the pharmaceuticals segment which grew 13.6 per cent.

Irvin Seah, senior economist, DBS Bank, said: "If you look at external leading indicators such as the PMI numbers in key export markets, they are all trending downwards. All signs are pointing to a poor outlook going forward. Growth momentum is going to be slower if not negative. The risk of a technical recession in Singapore is considerable."

"We expect a technical recession in Q3. We estimate manufacturing output will need to surge 20 per cent on a month-on-month sequentially adjusted basis in September in order to show sequential growth in Q3," said Leong Wai Ho, senior regional economist, Barclays Capital.

Still, some economists said the recession is likely to be short-lived as manufacturing and services activity could pick up in the next few months.

But a lot will depend on the health of the global economy.

Enrico Tanuwidjaja, vice president, Economics Research, RBS, said: "That depends on whether there are further stimulus from China and whether the US fiscal cliff will take its toll to the fullest extent. If it does then I will presume that the slowdown will continue even in high value added sectors."

Looking at the weak economic numbers and lower inflation, some economists said there is room for the central bank to tweak its monetary policy to allow for a slower appreciation of the sing dollar in its upcoming policy review in October.

Economists said the pace of economic expansion for the coming quarters is unlikely to match the increase seen in the first quarter.

For the whole year, they expect GDP growth to keep within the official forecast of between 1.5 and 2.5 per cent.

- CNA/cc