Jan 27, 2015

    S'pore Dec factory output falls less-than-expected 1.9%

    SINGAPORE'S manufacturing sector contracted less than expected last month, leading private-sector economists to predict upward revisions in last year's fourth-quarter gross domestic product (GDP) growth.

    With production declining in all clusters except precision engineering, factory output fell 1.9 per cent year-on-year last month, the Singapore Economic Development Board said yesterday afternoon.

    Economists polled by Bloomberg before the data release had been expecting industrial production to fall by a larger 3.4 per cent.

    Bank of America Merrill Lynch and Citi economists expect last year's fourth-quarter GDP growth to stand at 2 per cent and 1.6 per cent respectively - higher than the government's advance estimate of 1.5 per cent.

    Bank of America Merrill Lynch's Chua Hak Bin said last year's fourth-quarter GDP growth will likely be upgraded to 2 per cent year-on-year, from the Ministry of Trade and Industry's flash estimate of 1.5 per cent.

    "The flash estimate was predicated on a 2 per cent manufacturing contraction. The latest industrial production readings imply manufacturing contracted a slower 1.3 per cent year-on-year in Q4," he said.

    Citi economist Kit Wei Zheng noted that the fourth quarter headline industrial production is now down 1.3 per cent year-on-year versus the manufacturing GDP advance estimate of -2 per cent.

    He added: "An upward revision in fourth-quarter GDP from (official estimates) of 1.5 per cent year-on-year and 1.6 per cent quarter-on-quarter (seasonally adjusted annual rate) is therefore likely.

    "All else equal, fourth-quarter GDP growth could be revised up to 1.6 per cent year-on-year and 1.8 per cent quarter-on-quarter, with 2014 full-year growth at 2.9 per cent year-on-year versus the advance estimate of 2.8 per cent year-on-year."

    Nomura research analysts Euben Paracuelles and Brian Tan expect Singapore's central bank to keep its current policy stance of a "modest and gradual" appreciation of the Singapore dollar.

    "This small upside surprise in manufacturing output, combined with the Monetary Authority of Singapore's (MAS') assessment on the inflation outlook - which continues to emphasise the effects of a tight labour market on core inflation - remains consistent with our base case in which the MAS leaves its policy settings unchanged in April," said the Nomura analysts.