Weak November industrial output may weigh on Singapore’s Q4 growth

SINGAPORE: Singapore’s industrial production in November fell more than expected from a year earlier, an outcome that may weigh on the city-state’s fourth-quarter economic growth and points to a soft outlook for 2016.

Manufacturing output shrank 5.5% in November from a year earlier, data from the Economic Development Board (EDB) showed, weaker than the median market forecast for a 2.7% drop. On a monthly basis output contracted 3.6%. The median forecast was for an expansion of 0.8%.

November was the 10th straight month of annual contraction in manufacturing output, which in JanuaryNovember fell 4.6% from a year earlier.

“Today’s release reaffirms our view that the headwinds of persistently weak external demand and a slow inventory adjustment are likely to keep growth momentum subdued into 2016,” Rahul Bajoria, an economist for Barclays Bank, said in a note.

Weiwen Ng, an economist for ANZ, said weak global demand for the city-state’s goods, which include pharmaceuticals and electronics, is likely to weigh on externally-oriented sectors in the fourth quarter.

Meanwhile, the services sector is unlikely to have the type of support seen in the third quarter, when it was boosted by celebrations for the 50th anniversary of Singapore’s independence.

“It’s broadly in line with our view that Q4 will be challenging,” Ng said.

He expects economic growth to have slowed to 1.1% year-on-year in the fourth quarter, and that full-year growth for 2015 would probably come in at around 1.9%.

In the third-quarter, gross domestic product expanded 1.9% year-on-year. Singapore’s advance estimate of fourth-quarter gross domestic product is expected to be released in January.

Sluggish global demand has weighed on Singapore’s manufacturing sector, which accounts for about one-fifth of the city-state’s economy.

Electronics output fell 11.1% in November from a year earlier, while pharmaceuticals production shrank 9.0%.

Lower oil prices have also dented industrial production.

The manufacturing sector has been a drag on Singapore’s growth in 2015. In each of the first three quarters, manufacturing has contracted from a year earlier, by an average 4.5%. The services sector has fared better, averaging 3.8% growth.

The government’s current GDP growth forecast for 2015 is “close to 2.0%”. That would be the lowest since 2009, when Singapore’s economy was hit by the global financial crisis and contracted 0.6%. – Reuters