Analysts shudder over wave of gloomy economic data

Factory output feared to drop to -9.2%.

Singapore's economy is suffering from a double whammy of slowing manufacturing and persistent deflation, and analysts expect that the city-state's headline GDP figure will have to be revised downwards after a slew of negative economic data.

DBS warned that a big disappointment on December industrial production (IP) could be on the cards, with factory output growth feared to sink to -9.2% year-on-year. A steep drop in factory output is almost inevitable given the sharp contraction in Singapore’s latest non-oil domestic exports (NODX) and PMIs.

“We expect the headline IP number to come in at -9.2 (YoY). This will be significantly lower than the -7.8% factored into the advance GDP estimates. Indeed, this will bring overall manufacturing growth for the quarter down to -6.5% instead of the projected -6.0%. And this will implies a downward revision to the headline GDP growth by about 0.2%-pt,” said the report.

Meanwhile, CPI inflation has remained stuck in the negative territory. The headline number for December registered -0.6%, delivering  the lowest full-year inflation reading in 29 years.

"The risks in the global economy and their corresponding impact on global energy and commodity prices have significantly lowered the inflation trajectory for the economy. Moreover, domestic wage pressure arising from the labour crunch has also dissipated given the dicey growth outlook. Note retrenchment numbers have picked up last year as well compared to 2014. In this regards, expect CPI inflation to remain in the red until the middle of this year," DBS said.