Singapore’s manufacturing output fell 12.2 percent last month, more than economists expected, with the volatile pharmaceutical sector weighing heavily, official figures showed yesterday.
The data further raise the possibility that the city state, Southeast Asia’s wealthiest economy, could fall into a technical recession, economists said.
Analysts polled by Dow Jones Newswires had forecast a median 8.7 percent contraction for the month, compared with the same period a year earlier.
“It’s hard to take much solace from these numbers,” said David Cohen, director of Asian forecasting at Action Economics, a global research house.
The preliminary figures for last month followed a decline of 21.5 percent in July and a 3.0 percent gain in June, data from the Economic Development Board (EDB) showed.
The biomedical manufacturing cluster showed the biggest decline last month. It was down 33.8 percent overall, led by pharmaceutical output which dropped 35.7 percent compared with the same month last year, the EDB said. It blamed the fall on a different mix of ingredients that was produced last month.
Electronics output last month fell 7.1 percent while output in the chemicals cluster was down 6.0 percent last month, the EDB said.
Singapore’s open, trade-driven economy has been hurt by slowing global demand, and DBS Group Research said the latest output data “should provide a clue as to whether Singapore will enter into a technical recession.”
A technical recession is defined as two consecutive quarters of quarter-on-quarter contractions in the GDP.
Singapore’s growth in GDP, measured on a year-on-year basis, slowed to an annual rate of 2.1 percent in the second quarter, official data showed.
On an annualized, quarter-on-quarter basis, the economy contracted 6.0 percent in the second quarter, the data showed.
Cohen said the latest manufacturing data could translate into a third-quarter contraction as well, “which would be a technical recession.”
He said it remains to be seen what further damage could be done from this month’s turmoil on Wall Street, which included the bankruptcy of US investment bank Lehman Brothers, the merger of Merrill Lynch with Bank of America, and a US government bailout of insurance giant American International Group.
“It looks like it is finally catching up with us,” Cohen said.
US investment bank Morgan Stanley said that manufacturing accounts for about 26 percent of Singapore’s economy, adding that the latest data suggest a third-quarter recession “could be in the offing.”
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