Singapore’s PMI shrinks,recession looms

Singapore’s PMI slipped deeper into negative territory last month,dropping to 48.7 points from August’s 49.1 and staying below the 50 level that separates expansion from contraction,the Singapore Institute of Purchasing & Materials Management (SIPMM) said on Tuesday.

The dip in the overall PMI was attributed to further decline in new orders as well as first-time contraction in new export orders,SIPMM said in a statement. Production output,inventory and input prices reverted to contraction as well.

A separate PMI for Singapore’s electronics sector weakened as well,falling to 50.0 from 50.7 in August,the institute added.

Pang Cheng Duan,head of fixed income at Manulife Asset Management in Singapore,said the drop in the September PMI was expected given the weakness in the city-state’s manufacturing sector.

Together with the weak non-oil domestic exports and industrial production data for August,there is a higher probability that the Singapore economy will be in technical recession in the third quarter,he said.

Singapore’s economy shrank 0.7 percent in the second quarter over the previous one on an annualised and seasonally adjusted basis. Should the economy contract sequentially in July-September period,the country will slip into recession.

The government is expected to release advance third quarter gross domestic product data towards the end of next week. Based on past practice,the Monetary Authority of Singapore (MAS) will unveil its half-yearly monetary policy statement at the same time.

There is a fair chance that the MAS may ease its monetary stance in the upcoming policy meeting,Pang said.

The government in August narrowed its GDP growth forecast to 1.5 to 2.5 pct from an earlier 1-3 pct.

CONTEXT:

Singapore’s PMI is produced ahead of government data on manufacturing and exports.

Economists say the PMI does not appear to track activity at pharmaceutical companies,which make up Singapore’s fastest-growing manufacturing sector.