Singapore not headed for a ‘technical' recession

Industrial production data for October will be another nail in the coffin on expectation of a technical recession in Singapore, according to DBS analysts. Firstly, we have pointed out even before the 3Q advance estimates that we do not expect a technical recession in 2H10. And last week’s October NODX figure dealt the first blow to all those recession talks. The headline export figure rose by a massive 34.5% (5.8% MoM sa) on account of turnaround in both electronics and pharmaceutical export sales. And what is required right now is an industrial output growth of more than 30% for the month, which will essentially bury all the recession talks. Specifically, a 33.3% YoY expansion has been penciled into our forecast as we expect both key electronics and the biomedical segments to deliver the goods. That will provide some much need growth juice to the overall manufacturing growth and drag the economy from the deep negative end of the growth spectrum back to the positive territory in the final quarter. We expect the economy to grow by about solid 11% QoQ saar in the fourth quarter, up from the record contraction of 18.7% in 3Q10. A turnaround in manufacturing growth will be the crucial tie breaker for that to happen.