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Quick takes: Singapore Q4 GDP seen revised upwards on better-than-expected Dec factory output

Monday, January 26, 2015 - 16:14
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Singapore's manufacturing sector contracted less than expected in December, leading private-sector economists to predict upward revisions in Q4 2014 GDP (gross domestic product) growth.

SINGAPORE's manufacturing sector contracted less than expected in December, leading private-sector economists to predict upward revisions in Q4 2014 GDP (gross domestic product) growth.

With production declining in all clusters except precision engineering, factory output fell 1.9 per cent year-on-year in December, the Singapore Economic Development Board said on Monday afternoon.

Economists polled by Bloomberg before the data release had been expecting industrial production to fall by a larger 3.4 per cent.

Here's what private-sector economists had to say:

Bank of America Merrill Lynch and Citi economists expect Q4 GDP growth to stand at 2 per cent and 1.6 per cent respectively - higher than the government's advance estimate of 1.5 per cent.

Said Bank of America Merrill Lynch's Chua Hak Bin: "Fourth quarter GDP growth will likely be upgraded to 2 per cent year-on-year, from MTI's flash estimate of 1.5 per cent. The flash estimate was predicated on a 2 per cent manufacturing contraction. The latest industrial production readings imply manufacturing contracted a slower 1.3 per cent year-on-year in Q4."

Said Citi economist Kit Wei Zheng: "Q4 headline industrial production is now down 1.3 per cent year-on-year versus the manufacturing GDP advance estimate of -2 per cent. An upward revision in Q4 GDP from (official estimates) of 1.5 per cent year-on-year and 1.6 per cent quarter-on-quarter (seasonally adjusted annual rate) is therefore likely - all else equal, Q4 GDP growth could be revised up to 1.6 per cent year-on-year and 1.8 per cent quarter-on-quarter, with 2014 full year growth at 2.9 per cent year-on-year versus the advance estimate of 2.8 per cent year-on-year."

Nomura research analysts Euben Paracuelles and Brian Tan expect Singapore's central bank to keep its current policy stance of a "modest and gradual" appreciation of the Singapore dollar.

"This small upside surprise in manufacturing output, combined with the Monetary Authority of Singapore's (MAS) assessment on the inflation outlook - which continues to emphasize the effects of a tight labour market on core inflation - remains consistent with our base case in which the MAS leaves its policy settings unchanged in April," said the Nomura analysts.

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