SINGAPORE: Singapore's manufacturing sector continued to contract for the fourth consecutive month in October with orders continuing to drop, raising fears that the city could face a recession in the near future. There had been hope that as other regional countries saw their economies improve, Singapore would see a rebound in the manufacturing sector, but according to Singapore's Purchasing Manager's index (PMI) it slipped deeper into negative territory last month, dropping to 48.3 points from September's 48.7 points, the Singapore Institute of Purchasing & Materials Management (SIPMM) said on Monday. A PMI reading below 50 shows activity is contracting. “The dip in the overall PMI was attributed to a further decline in new orders, new export orders as well as production output,” SIPMM said in a statement. “Employment continued to contract for its 16th consecutive month,” the institute added. The drop in Singapore's PMI reading contrasts with Hong Kong, where a PMI compiled by HSBC rebounded to positive territory in October as output and employment increased. With a shrinking economy, many in Singapore fear the city-state is headed towards a recession. The country's Gross Domestic Product (GDP) fell an annualized 1.5 percent in the three months through September from the previous quarter, when it expanded a revised 0.2 percent, the Trade Ministry said on Friday. The central bank, which uses the currency to manage inflation, said it will maintain a modest and gradual appreciation of the local dollar. But fears are continue to gain steam here that the country is headed towards recession, much like the economies of Europe as inflation rises and current worries take hold. Prime Minister Lee Hsien Loong said that he is confident the city-state will avoid being the first major Asian economy to fall into recession this year as there are positive job numbers in the city. The country's inflation slowed to its lowest in two years in August as the global economy continues to be weakened and saw reduced pressure for price increases. The inflation drop also gives the city-state's central bank more mobility to ease monetary policy next month. The consumer price index is expected to rise 3.6 percent in August from a year earlier, down sharply from July's 4.0 percent, according to the median estimate of 11 economists polled by Reuters news agency. If accurate, it would be the lowest it has been in the country since October 2010, when it was reported at 3.5 percent. The core inflation measure, which excludes housing and private car prices, probably rose 2.3 percent year-on-year, slowing from July's 2.4 percent. The Monetary Authority of Singapore (MAS) looks more closely at the core figure when setting policy. “Headline inflation probably eased to 3.6 percent in August, helped in part by a high base last year for transport and housing," Bank of America Merrill Lynch said in a note to clients. “The lower inflation reading will likely give the MAS room to ease policy at the October meeting." Singapore's economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, gross domestic product (GDP) data showed last month. Economists have told Bikyamasr.com they expect the Southeast Asian city-state's gross domestic product to grow 2.4 percent this year, down from a median estimate of 3.0 percent three months earlier, the central bank's latest quarterly Survey of Professional Forecasters showed.
