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UPDATE 1-Singapore's weak Aug output data raises recession fears
SINGAPORE, Sept 26 |
SINGAPORE, Sept 26 (Reuters) - Singapore's industrial production unexpectedly fell in August from a year ago, raising fears the trade-dependent economy will slip into recession this quarter, and increasing the chances of monetary easing by the central bank next month.
The city-state's manufacturing sector fell 2.2 percent last month from a year ago, dragged down by slumping demand for its key exports of electronics, the Economic Development Board said on Wednesday.
Economists polled by Reuters had expected industrial production to rise 1.1 percent year-on-year but stay unchanged month-on-month after seasonal adjustments.
"Unless we see industrial production rebound by at least 6 percent year-on-year in September, Singapore will probably fall into a recession in the third quarter," said CIMB regional economist Song Seng Wun.
On a seasonally adjusted basis, industrial production declined by 2.3 percent in August from July when output fell a revised 8.7 percent month-on-month.
Manufacturing accounts for about a quarter of Singapore's gross domestic product. Other Asian nations have also reported slowing factory output because of weak export orders from the United States and Europe.
The U.S. dollar rose against the Singapore dollar after the data, rising to S$1.2308 from S$1.2305.
Singapore's economy shrank 0.7 percent in the second quarter on an annualised and seasonally adjusted quarter-on-quarter basis as manufacturing and services both shrank, and a quarterly contraction in July-September will put the city-state in technical recession.
In that case, the central bank will be under greater pressure to ease monetary policy at its meeting next month.
DIFFICULT TO PREDICT
Singapore's industrial production is difficult to predict because pharmaceuticals and oil rigs tend to be highly volatile from month to month.
CIMB's Song said while the drop in marine and offshore engineering output was "computational", given the strong order books of rig builders Keppel Corp and Sembcorp Marine , the electronics sector faced serious difficulties.
Output from the electronics cluster fell 7.3 percent year-on-year while the marine and offshore engineering segment, which includes oil rigs, contracted 27.2 percent.
Singapore's non-oil domestic exports fell a more-than-expected 9.1 percent in August from July after seasonal adjustments and the Purchasing Manager's Index (PMI) stayed below the 50-point level for a second straight month in August.
"We have not really tapped into these product launches that are occurring in North Asia right now, like iPhone 5 and so on. We are more of the secondary component suppliers and that's hurting us," said Barclays economist Leong Wai Ho. (Reporting by Kevin Lim; Additional reporting by Eveline Danubrata; Editing by Sanjeev Miglani)
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