Singapore’s industrial output fell the most in more than a year last month, damping the outlook for growth in the fourth quarter as the government prepares to release GDP data next week.
However, the oil-price slump that contributed to declines in petroleum production and rig building may help the economy next year, Credit Suisse Group AG said.
The production data for last month show the mixed impact of the decline in oil prices to near five-year lows on Singapore’s manufacturing industry, which makes up about 19 percent of the economy. Here is what it means for growth and monetary policy:
Petroleum refining fell 24.1 percent in November from a year earlier due to plant maintenance shutdowns, while marine and offshore engineering declined 3.9 percent on lower contributions from rig-building activities, the Singapore Economic Development Board said yesterday. Oil’s decline was probably a contributing factor and will negatively affect oil-related industries, Singapore-based Credit Suisse economist Michael Wan said.
Manufacturing of food, beverages and tobacco rose 1.1 percent from a year earlier last month, the fourth increase in a row, according to data compiled by Bloomberg based on previously reported figures. Electronics output gained for the first time in three months.
The “oil-price decline is still net positive to the Singapore economy. It boosts consumer demand through lower petrol prices,” Wan said. “The second-order effect can potentially also be quite powerful. To the extent that it boosts developed economies’ growth, it will benefit an open economy like Singapore.”
Falling oil prices are positive for Singapore’s competitiveness and good for its consumers, Singaporean Minister of Finance Tharman Shanmugaratnam said in Washington this month. It is not an “unmitigated blessing,” as Singapore, an oil importer, is influenced by the state of the region where some neighbors “are affected by the oil price decline,” he said.
GDP this quarter may rise between 0.7 percent and 0.9 percent from a year earlier because of a high base in the same period last year, when the economy expanded more than 4 percent, and weak quarterly manufacturing performance, Wan said ahead of GDP data due on Thursday next week.
Singapore is bracing for slower global growth, with the government predicting on Nov. 25 that the city-state’s expansion would ease to about 3 percent this year from 3.9 percent last year and the recovery beyond would be uneven. The economy expanded 3.3 percent in the first three quarters from a year earlier.
Singapore’s consumer prices fell for the first time since December 2009 last month, as a decline in oil prices added to falling accommodation and private transport costs.
The slide gives the Monetary Authority of Singapore more room to ease policy and a lot more policy space, Mizuho Bank Ltd economist Vishnu Varathan said.
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