Technical recession looms as manufacturing shrinks

Technical recession looms as manufacturing shrinks
Above photo is this is according to the latest purchasing managers' index, which improved slightly to 48.8 in November from October's 48.3 but remained under the 50-point threshold, signalling a contracting manufacturing economy.

SINGAPORE - Singapore's manufacturing sector contracted in November from the previous month, supporting the view that the economy may slip into a mild technical recession in the fourth quarter.

This is according to the latest purchasing managers' index (PMI), which improved slightly to 48.8 in November from October's 48.3 but remained under the 50-point threshold, signalling a contracting manufacturing economy.

The latest reading also stands in contrast to a recent string of positive economic news from Asia - China's PMIs are in expansion, Japan posted better- than-expected industrial production growth and South Korea reported surprising export growth.

But new orders, new export orders and production output all shrank at a slower pace, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the monthly index based on a survey of 150 industrial firms' purchasing executives.

Even so, Bank of America Merrill Lynch economist Chua Hak Bin thinks a technical recession "is looking increasingly probable, if November manufacturing and exports mirrors the weak PMI".

Citi economist Kit Wei Zheng, too, sees the latest PMI reading as consistent with the mild technical recession that he expects for Q4.

This possibility of a technical recession was raised when factory output in October shrank 2.1 per cent from a year ago.

But not all economists agree; some say Singapore may get through the final months of 2012 without a second consecutive quarter-on-quarter dip in GDP.

Dr Chua reckons, however, that the tech recovery is also "looking increasingly shaky".

Singapore's electronics PMI slipped further into contraction zone to a reading of 47.4 in November from 47.5 in October.

"The electronics hollowing-out thesis is being validated by how Singapore's tech recovery is lagging that of North-east Asia," Dr Chua said.

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