The sharp decline of 20.1% is just a technical blip.
According to CIMB, due to a larger drag from tech and a surprise fall in transport engineering, Aug’s MPI growth reading of -2.2% yoy fell well short of expectations.
Here's more from CIMB:
The third straight month of tech decline has probably pushed Singapore into a technical recession with a sequential decline of about 2% qoq annualised (-0.7% qoq in 2Q12). Yoy, 3Q12 GDP growth probably slowed from 2Q12’s 2% to 0.8-1%. The advance GDP estimate is slated for release before mid-October. Growth concerns resurface as inflationary worries ease.
MPI dips on transport engineering and…
We will not blame drugs for the poor manufacturing reading this time. Output for the biomedical cluster expanded 13% yoy last month (+14% in Jul 2012).
Instead, due to a pullback in transport engineering and still-sluggish tech, manufacturing output growth as measured by the monthly manufacturing production index (MPI) contracted 2.2% yoy in Aug 2012 vs. Jul 2012’s revised +2.5% (previously +1.%).
This is well below our estimate of +1.6% and consensus’s +1.0%. For the Jul-Aug 2012 period, MPI expanded a marginal +0.2% yoy vs. 2Q12’s +4.6%.
Due mainly to a high base (Aug 2011: +22.6% yoy), the transport engineering cluster contracted for the first time in a year last month by -20.1% yoy. Given the still-strong order books of the companies in the marine and offshore engineering segment, the sharp output last month is seen as a technical blip. The same cannot be said of tech output.
…continued tech drag
Tech output slipped 5.3% mom SA, the third consecutive month of contraction. Yoy, despite the undemanding base of -26.4% yoy last Aug, tech output fell 7.3% yoy last month (-5% for Jun-Jul), in its 18th consecutive month of yoy decline. This sustained drag shaved 2% pts off Aug’s MPI growth.
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