Tumble in Singapore factory output raises odds of October policy easing

Singapore's factory output in July unexpectedly contracted from a year earlier, heightening concerns about the outlook for the city state's economy and keeping the pressure on policymakers to deliver more stimulus. Manufacturing output fell 3.6 percent from a year earlier in July, the first contraction in five months and the biggest decline since December, data from the Singapore Economic Development Board showed.
The median forecast in a Reuters survey was a rise of 0.9 percent year-on-year.
On a month-on-month and seasonally adjusted basis, factory output fell 4.0 percent in July, versus a forecast for a contraction of 1.1 percent.
"It's a very weak print. It not only raises the probability that third-quarter (GDP) will be negative quarter-on-quarter but I think the year-on-year number will also be quite weak," said Michael Wan, an economist for Credit Suisse.
"I think it's going to raise the probability of MAS easing in October," said Wan, who has been forecasting that the central bank would ease at its October policy review by lowering the mid-point of the Singapore dollar NEER's policy band.
Faced with anaemic growth, the MAS - which manages monetary policy via changes to the exchange rate rather than interest rates because trade flows dwarf the $290 billion economy - unexpectedly eased in April.
Singapore's manufacturing sector has been a drag on the city-state's economic growth for much of the past year and a half, with weak exports doing a lot of damage. In July, shipments tumbled as sales to China and the United States declined.
Marine and offshore engineering output slid 33.4 percent in July from a year earlier, after falling 26.3 percent in June.
Production in this segment has tumbled 29.4 percent in January to July, compared to the year ago period, as a slide in global oil over the past two years has depressed demand for offshore drilling rigs built by Singapore's rig-building industry.
In a sign of the struggles of oil-related firms, oilfield services firm Swiber Holdings Ltd filed for creditor protection in late July, making it Singapore's biggest casualty of the oil slump.
Output in the volatile pharmaceuticals sector fell 14.1 percent in July from a year earlier, after sliding 15.4 percent in June.