No wonder industrial production index will dip 2.1%

This sector depressingly failed.

According to DSB, industrial production index for Oct12 is on tap today and chance is high that it will be another disappointment.

Here's more from DBS:

The headline number is expected to print a decline of 2.1% YoY. That’s about a drop of 1.0% on the margin compared to the previous month and following a 1.8% MoM (sa) easing in Sep12.

Although market seems to be slightly more sanguine and probably expecting a modest rebound (consensus: -0.7% YoY, 5.4% MoM sa), the range of the forecasts is wide, suggesting a high degree of uncertainty to this number.

And the reason is quite simple. The non-oil domestic export (NODX) figure failed to impress in the month. The NODX fell 1.2% MoM sa although the low base last year has propped up the year-on-year change to 7.9%.

On a cyclical basis, we can expect a modest improvement in the coming months but the momentum will remain sluggish. Weak demand is one factor but the drastic decline in Singapore’s export competitiveness is certainly one key consideration.

A higher than average inflation and a strengthening Sing dollar will surely make for poor export and industrial performance. In fact, even if global outlook improves in the coming months, Singapore will not benefit as much as the regional peers and quite likely, the economy will continue to underperform in terms of growth and inflation profiles within the region. Structural factors are at play, resulting in such poor performance.



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