This is unexpected.
Factory output dropped in every sector in Singapore last month contrary to the government's advance third-quarter GDP estimates.
Industrial output in September fell 7.7 percent year on year as declines were posted across every sector, reported AFP quoting the Economic Development Board.
The advance estimates disclosed on October 12, on the other hand, said the economy had grown by 0.8 percent in the third quarter compared with the same period last year — the first such growth in more than a year.
Based on those estimates, the government raised its economic forecast from a sharp 4 to 6 percent fall in GDP this year to a more moderate 2 to 2.5 percent drop.
The question now is whether the September factory slump will drag down third-quarter growth. After all, manufacturing makes up a quarter of the Singapore economy.
What happened was clearly unanticipated.
The government press release issued with those advance estimates said, "Growth was driven by the continued expansion of biomedical and electronics output" — industries which had the stuffing knocked out of them in September.
Apparently, the market plunged after the advance estimates were made.
The advance estimates were "computed largely from data in the first two months of the quarter (ie, July and August 2009)", said the press release.
Read the press release and hope the estimates prove more right than wrong. Here is what it said:
The Ministry of Trade and Industry (MTI) announced today that the Singapore economy expanded by 0.8 per cent year-on-year in the third quarter of 2009. Growth was driven by the continued expansion of biomedical and electronics manufacturing output, and improvements in the trade-related and tourism sectors of the economy on the back of a gradual stabilisation in global economic conditions.
Taking these factors into account, MTI is upgrading the economic growth forecast for 2009 to -2.5 to -2.0 per cent.
Advance estimates show that in the third quarter of 2009, Singapore’s GDP expanded by 14.9 per cent on a seasonally-adjusted quarter-on-quarter annualised basis, following a 22.0 per cent expansion in the second quarter of the year. In year-on-year terms, the economy grew by 0.8 per cent, compared to a 3.2 per cent contraction in the preceding quarter.
The manufacturing sector expanded by 35 per cent on a seasonally-adjusted quarter-on-quarter annualised basis, on the back of the previous quarter’s spike of 59 per cent. This increase was primarily due to a continued surge in the production of higher value active pharmaceutical ingredients in the biomedical manufacturing cluster. The electronics cluster also grew, due to continued restocking activities and uptick in consumer demand for electronic devices.
But AFP reported today:
Biomedical output shrank 13.9 percent (in September) after expanding 97.7 percent the previous month. The biomedical sector is highly volatile because plants are routinely closed for maintenance while output targets can vary due to different products being made.
In the electronics industry, output eased 1.1 percent, chemicals dropped 8.7 percent and transport engineering fell 8.1 percent, the EDB said.
Total manufacturing output for the January-September period was down 6.9 percent from a year ago.
Despite the poor data, recent figures suggest Singapore's economy was recovering from the slump with preliminary data released earlier this month showing 0.8 percent growth in the third quarter.
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