Industrial production figures are menacing hints of a technical recession

Dropping beyond 1% will wipe out previous gains.

DBS said in its report that today's industrial production data will hint on the risk of a technical recession. The headline number is expected to dip by 6.8% YoY, compared to a 6.1% decline previously. 

On the margin, anything more than a 1.0% drop will essentially wipe out the gain in the previous month and push the economy closer to a technical recession.

Here's more from DBS:

Indeed, judging from the poor export performance in August, the risk has risen significantly. Headline non-oil domestic exports slumped by 8.4% YoY, after a 0.7% drop in the previous month. 

This is significantly more than market expectation of a 3.5% decline. The ugliest part of the data set is the sequential month-on-month decline of 4.6% in NODX, which essentially wiped out the modest 0.2% gain in July.

External headwinds arising from the deceleration in China’s growth was the key reason behind the dire outcome. PMIs of all key markets have also turned southwards while the knock-on effects from the equity market debacle in China and the impact of the yuan devaluation have yet to be fully manifested in the headline number.

These factors essentially underscored the dicey global outlook and contributed to the slump in demand. 

The economy contracted by 4.0% QoQ saar in 2Q15, led by a 18.3% drop in manufacturing output. Another month of poor IP number will implies further contraction front.