Reuters
Reuters - Wednesday, November 26
By Neil Chatterjee
SINGAPORE, Nov 26 - Singapore's factory output fell a larger-than-expected 12.7 percent in October from September after seasonal adjustments, as electronics and drugs output slid, suggesting recession extended into the fourth quarter.
Indeed, analysts said the manufacturing sector, which accounts for about a quarter of Singapore's trade-dependent economy, was facing tougher times ahead with the global outlook deteriorating quickly and demand weakening in key export markets.
From a year earlier, factory output fell 12.6 percent, the Economic Development Board said.
"The poor October manufacturing data marks a bad start for the fourth-quarter gross domestic product for Singapore, and manufacturing is likely to continue reprising its role as the main drag on growth in that quarter," said Alvin Liew at Standard Chartered.
"The risk to our full-year 2008 GDP of 3 percent is clearly on the downside due to the manufacturing outlook. This should be negative for the Singapore dollar."
Singapore slipped into recession after the economy contracted in for two consecutive quarters -- the second and the third -- a common definition for recession.
The central bank, which sets monetary policy by managing the Singapore dollar against a secret basket of currencies, eased policy in October to a neutral bias for the dollar, to head off a financial storm that has pushed the economy into recession.
The Singapore dollar
The central bank says it has no plans to change policy before a review scheduled in April, though economists think it still might loosen policy before then as growth weakens and inflation cools.
The government, which is trying to diversify away from manufacturing into service industries such as finance and tourism, has said the economy could contract next year and is planning an expansionary budget in January to give it a boost.
"The good news is that the government is responding reasonably aggressively but sadly it can do little to avoid the recession continuing for a few months yet," said Robert Prior-Wandesforde, economist at HSBC.
The monthly manufacturing data follows a better-than-expected rise of 7 percent in September when drug output jumped. Drugs production is volatile, but economists say demand for pricier drugs has weakened as consumers cut medical spending.
"Pharmaceuticals explain much of the collapse in production...it is worth stressing that the most worrying aspect of recent Singapore data has been signs of weakness in services," added Prior-Wandesforde.
Electronics, which account for about a third of output, fell 14 percent in October from a year ago. Drug production, which accounts for about a fifth of the total, slumped 31.2 percent.
- wong chee tat :)
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