Can Singapore finally expect GDP expansion in 3Q?

Not with the sub-par performance of manufacturing sector.

A contraction in the third quarter gross domestic product (GDP) is on the cards now for the city-state, should the underwhelming performance of manufacturing sector continues to persists.

According to a note by DBS, Singapore’s data is turning from bad to worse, with July manufacturing output sinking 3.6% on a yearly basis.

"Excluding biomedical, industrial output dipped by 2.0%. On the seasonally adjusted basis, output contracted by 4.0% on-month. Excluding biomedical, output will be down by 4.8%," the note stated.

It underscored how all other key clusters reported declines in their outputs except for the electronics sector, which is riding on the low base in the same period last year.

"This shouldn’t come as a surprise judging from the export performance for the month. July non-oil domestic exports plunged by 10.6% on-year," DBS explained.

For DBS, the poor industrial production figures reflect downside risk to the growth outlook amid the challenging external environment.

"There is simply a lack of positive catalysts in the global economy that could potentially lift growth prospects for the manufacturing sector or the economy," the note stressed.

To recall, Singapore's GDP grew 2.2% in the second quarter of the year.

"Notably, it was the manufacturing sector, riding on the back of a miraculous surge in biomedical, that helped to prevent a GDP contraction, while the key services sector faltered in the second quarter," DBS argued.