Sounds like some mini Wall Street thingy!
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Factory output falls for 2nd straight month
</TR><!-- headline one : end --><TR>Technical recession looms; dismal figures cause economists to lower growth forecasts </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
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Manufacturing output, which comprises about a quarter of the economy, fell 12.2 per cent last month from a year ago. Pharmaceuticals also shrank by 35.7 per cent. -- ST FILE PHOTO
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->RECESSION was on the lips of economists yesterday as Singapore's factory output fell last month for the second month in a row.
Manufacturing output, which comprises about a quarter of the economy, fell a worse-than-expected 12.2 per cent last month from a year ago. This followed a revised 21.5 per cent fall in July, said the Economic Development Board.
Pharmaceuticals were again a major drag on growth. The segment shrank by 35.7 per cent last month, on top of a 69.6 per cent contraction in July.
Yesterday's numbers 'disappointed market expectations and confirm a technical recession in the third quarter', said Citigroup economist Kit Wei Zheng, adding that real gross domestic product (GDP) growth may have fallen by as much as 1 per cent from a year ago.
A technical recession - two straight quarters of negative growth - will be established only next month when advance GDP figures for the quarter are released.
Singapore could well be the first Asian country to enter a technical recession, which is 'all but confirmed', added CIMB-GK economist Song Seng Wun.
Mr Song has lowered his full-year growth tip to 2.5 per cent - far below the official forecast of 4 to 5 per cent.
But while the volatile biomedical sector probably tipped the economy over into recession territory, all other sectors also underperformed, which is a bigger worry, said economists.
Excluding pharmaceuticals, manufacturing production fell 5.3 per cent last month, the sharpest drop in at least five years, said DBS Bank's Irvin Seah, who has cut his full-year growth prediction to 3.5 per cent.
Output in the key electronics cluster declined for the first time last month after three consecutive months of growth, as did chemicals production.
The only cluster that grew - transport engineering - expanded a measly 0.1 per cent, driven by a 13.9 per cent growth in the aerospace segment.
Even then, the marine and offshore engineering industry within this cluster actually declined 8.6 per cent, suggesting that 'even the third pillar of support in manufacturing looks shaky', said OCBC Bank economist Selena Ling.
The broader slowdown beyond pharmaceuticals is likely to continue into next year, as external demand weakens given the recent financial upheaval in the United States, economists said.
In fact, 'a technical recession caused by a downdraft in pharma would result in probably no jobs lost', explained Barclays Capital's Leong Wai Ho. Of more concern is the effect of the financial turbulence on jobs here, he said.
Still to come is the full effect of lower external demand, which will probably be felt in the first quarter next year and start to affect the labour market in the second quarter, Mr Leong added. He has lowered his growth forecast to 4.1 per cent and slashed next year's forecast from 4.8 per cent to 3.5 per cent.
Barclays economists said the Government will be concerned with the knock-on effects on employment in the financial and business services sectors.
And they also expect the Government to roll out a fiscal stimulus package that will likely include tax rebates and more relief for lower income households, older workers and smaller companies. If economic conditions worsen, companies' Central Provident Fund contribution rate might also be cut.
A report by Morgan Stanley predicted that global demand would slow more next year, at a time when domestic demand from construction is likely to start tapering off. 'The slowdown (here) will likely spread...sectors with export and financial linkages have taken the first order hit. Sectors that typically cater to domestic demand should be next.'
Most economists now expect the Monetary Authority of Singapore to adopt a neutral monetary policy stance next month, which would be a shift from its usual strategy of gradual appreciation of the exchange rate.
There is a higher possibility of a downward band re-centring, said Mr Kit.
Added Mr Seah: 'A weaker currency would provide some relief to the manufacturing sector and externally driven services sector..There is more impetus for monetary policy to shift towards accommodating growth rather than addressing inflation, as inflation risks will probably taper off with the slowdown in global demand.' [email protected]
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Factory output falls for 2nd straight month
</TR><!-- headline one : end --><TR>Technical recession looms; dismal figures cause economists to lower growth forecasts </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
Manufacturing output, which comprises about a quarter of the economy, fell 12.2 per cent last month from a year ago. Pharmaceuticals also shrank by 35.7 per cent. -- ST FILE PHOTO
</TD></TR></TBODY></TABLE>
<TABLE><TBODY><TR><TD>
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->RECESSION was on the lips of economists yesterday as Singapore's factory output fell last month for the second month in a row.
Manufacturing output, which comprises about a quarter of the economy, fell a worse-than-expected 12.2 per cent last month from a year ago. This followed a revised 21.5 per cent fall in July, said the Economic Development Board.
Pharmaceuticals were again a major drag on growth. The segment shrank by 35.7 per cent last month, on top of a 69.6 per cent contraction in July.
Yesterday's numbers 'disappointed market expectations and confirm a technical recession in the third quarter', said Citigroup economist Kit Wei Zheng, adding that real gross domestic product (GDP) growth may have fallen by as much as 1 per cent from a year ago.
A technical recession - two straight quarters of negative growth - will be established only next month when advance GDP figures for the quarter are released.
Singapore could well be the first Asian country to enter a technical recession, which is 'all but confirmed', added CIMB-GK economist Song Seng Wun.
Mr Song has lowered his full-year growth tip to 2.5 per cent - far below the official forecast of 4 to 5 per cent.
But while the volatile biomedical sector probably tipped the economy over into recession territory, all other sectors also underperformed, which is a bigger worry, said economists.
Excluding pharmaceuticals, manufacturing production fell 5.3 per cent last month, the sharpest drop in at least five years, said DBS Bank's Irvin Seah, who has cut his full-year growth prediction to 3.5 per cent.
Output in the key electronics cluster declined for the first time last month after three consecutive months of growth, as did chemicals production.
The only cluster that grew - transport engineering - expanded a measly 0.1 per cent, driven by a 13.9 per cent growth in the aerospace segment.
Even then, the marine and offshore engineering industry within this cluster actually declined 8.6 per cent, suggesting that 'even the third pillar of support in manufacturing looks shaky', said OCBC Bank economist Selena Ling.
The broader slowdown beyond pharmaceuticals is likely to continue into next year, as external demand weakens given the recent financial upheaval in the United States, economists said.
In fact, 'a technical recession caused by a downdraft in pharma would result in probably no jobs lost', explained Barclays Capital's Leong Wai Ho. Of more concern is the effect of the financial turbulence on jobs here, he said.
Still to come is the full effect of lower external demand, which will probably be felt in the first quarter next year and start to affect the labour market in the second quarter, Mr Leong added. He has lowered his growth forecast to 4.1 per cent and slashed next year's forecast from 4.8 per cent to 3.5 per cent.
Barclays economists said the Government will be concerned with the knock-on effects on employment in the financial and business services sectors.
And they also expect the Government to roll out a fiscal stimulus package that will likely include tax rebates and more relief for lower income households, older workers and smaller companies. If economic conditions worsen, companies' Central Provident Fund contribution rate might also be cut.
A report by Morgan Stanley predicted that global demand would slow more next year, at a time when domestic demand from construction is likely to start tapering off. 'The slowdown (here) will likely spread...sectors with export and financial linkages have taken the first order hit. Sectors that typically cater to domestic demand should be next.'
Most economists now expect the Monetary Authority of Singapore to adopt a neutral monetary policy stance next month, which would be a shift from its usual strategy of gradual appreciation of the exchange rate.
There is a higher possibility of a downward band re-centring, said Mr Kit.
Added Mr Seah: 'A weaker currency would provide some relief to the manufacturing sector and externally driven services sector..There is more impetus for monetary policy to shift towards accommodating growth rather than addressing inflation, as inflation risks will probably taper off with the slowdown in global demand.' [email protected]
