Singapore production drops a second month, signaling recession

September 26, 2008
Singapore Democrats

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Shamim Adam
Bloomberg

Singapore’s industrial production contracted for a second month in August on declining electronics and pharmaceutical output, suggesting the economy may slide into a recession this quarter.

Manufacturing, which accounts for a quarter of Singapore’s economy, fell 12.2 percent from a year earlier, following a revised 21.5 percent drop in July, the Economic Development Board said today. The median forecast of nine economists in a Bloomberg News survey had been for a 9 percent decline.

Singapore’s growth is faltering as a deepening global slowdown hurts orders for drugs, consumer electronics and other products. That may prompt the central bank to allow slower gains in the currency when it reviews its policy next month, helping exporters by keeping prices of the island’s goods competitive.

“The slowdown in demand from key export markets is hurting production, and Singapore isn’t the only one in the region that’s affected,” Alvin Liew, an economist at Standard Chartered Plc in Singapore, said before today’s release. The $161 billion economy has probably entered into a technical recession, defined as two straight quarters of negative growth, he said.

Easing inflation and weakening growth has raised the likelihood that the central bank “might reverse its tight monetary policy,” economists at Singapore’s United Overseas Bank Ltd. wrote in a report today.

The U.S. housing slump that forced Lehman Brothers Holdings Inc. into bankruptcy and prompted the sale of Merrill Lynch & Co. to Bank of America Corp. has hurt exports to Asia’s largest overseas market. Singapore’s overseas shipments fell the most in 20 months in August.

Drugs, chips

Industrial production decreased a seasonally adjusted 1.9 percent in August from the previous month, matching the drop in July, today’s report showed. Economists were expecting a 2.6 percent gain.

Electronics production fell 7.1 percent last month from a year earlier, following a revised 7.5 percent gain in July. Pharmaceutical production dropped 35.7 percent in August from a year earlier, after falling a revised 69.6 percent the month before.

Drugs make up about 22 percent of Singapore’s manufacturing and electronics account for about 30 percent.

Singapore’s industrial output tends to fluctuate from month to month because of swings in production by drug companies that shut plants for cleaning before making different products.

Computer-chip production in Singapore rose 3 percent in August, from a revised gain of 14.4 percent the month before. Output of consumer electronics dropped 60.8 percent.

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