Singapore’s factory output tumbled again in August—after a hopeful July, drawing the island state closer to a technical recession.
August’s factory production fell by 8% year-on-year, the sector’s fourth straight month of drop, the worst since December 2015, and the biggest monthly slump since 2012.
Manufacturing was primarily dragged down in August by electronics, which recorded an output slump of 24.4% year-on-year—the sharpest fall within the sector.
Has the hope of turnaround ended?
Back in July, the electronics segment’s output was flat while the manufacturing sector’s output only fell 0.1%, giving the country of hope of turnaround.
Both electronics and manufacturing are important to Singapore’s trade-dependent economy, which shrank 3.3% in Q2 on a seasonally adjusted annualised basis.
The electronics segment has a 27.4% weightage in the manufacturing index of Singapore’s Economic Development Board while the manufacturing sector is about a fifth of the country’s GDP.
According to Selena Ng, head of treasury research and strategy at OCB in a note, even the prospect of a mini trade deal between China and the US may not suffice to lift the country’s manufacturing sector for now.
If Singapore’s GDP continues to contract, it would fall into a technical recession—defined as two straight quarters of sequential decline.
The slowdown has raised expectations that the country’s the Monetary Authority may slow the appreciation of the Singapore dollar next month when it announces the twice-yearly policy statement.
Unlike other central banks that rely on interest rates, Singapore manages monetary policy through the exchange rate.
