Drugs inject life into Singapore economy in 3Q

Output in September rose by a solid 26.2% YoY on account of the rebound in pharmaceutical production although the final 3Q10 GDP growth saw the economy contracted by 18.7% QoQ saar (10.6% YoY).

In a statement, DBS Bank said the number is in line with its -18% QoQ saar, 10.8% YoY expectation. The statistics, it said, is actually an upward revision from the advance estimates (-19.8% QoQ saar, 10.3% YoY) given the better than expected industrial production growth in September.

This put average manufacturing growth for the quarter at 14.3% YoY, which is higher than the 12.1% expansion noted in the advance estimates.

“Though many has pointed out that pharmaceutical output typically will slump in the fourth quarter, thereby pushing the economy into a pharma-led recession, historical records suggest otherwise,” the bank said.

According to DBS, one quarter of down swing will soon be followed by a quarter of rebound as producers embark on new batches of drugs and ramp up production.

“With the pharmaceutical output having fallen by 45.0% QoQ saar in the third quarter, the most likely direction in the next quarter should be up. As such, we believe a turnaround in pharmaceutical production could provide some lift to headline GDP growth in the fourth quarter,” DBS said.