Singapore August factory output plunge raises monetary easing hopes

SINGAPORE (Reuters) - Singapore's industrial production fell 8% in August from a year earlier and missed expectations by a wide margin as electronics output plunged, data showed on Thursday, raising bets that its central bank would ease monetary policy in October.

This compares with a revised 0.1% fall in July, and a median forecast of 0.7% contraction in a Reuters survey.

Electronics output fell 24.4% in August after showing flat growth in the month earlier, data from the Singapore Economic Development Board showed. Prior to July, Singapore's electronics manufacturing sector had shown consecutive declines this year.

"It's a particularly soft set of numbers," ING economist Rob Carnell told Reuters.

"I'm looking for explanations why they're particularly soft here where it had been looking here and elsewhere in the region that things were beginning to stabilise a little bit. So, I'm a bit concerned," he said adding that the shock decline has put monetary policy easing "in the bag".

Exports from Singapore to China surged 38.5% last month, prompting economists to believe that retailers rushed to bring in Chinese merchandise before higher tariffs hit, a process known as "front-loading".

But that did not manifest itself in the August manufacturing numbers as expected, leaving economists perplexed as they had expected a bigger impact of the pick-up in Chinese demand.

"It's looking much worse than we expected," Maybank Kim Eng economist Lee Ju Ye told Reuters.

"Electronics output seems to be very bad. So, maybe, the front-loading story has not been playing out as we have been expecting".

On a month-on-month and seasonally adjusted basis, industrial production in August also missed forecasts and fell 7.5%, after a 3.6% rise all in July. The median forecast was for a rise of 0.1%.

Singapore has been hit hard by the Sino-U.S. trade war, which has disrupted world supply chains in a blow to business investment and corporate profits.

Earlier this month, economists sharply cut their forecasts for Singapore's economic growth in 2019, citing trade tensions and a slowing China as the top risks to the financial hub.

Singapore's advance estimate for third-quarter GDP growth and MAS semiannual monetary policy statement will be released on the same day in October. The date has not been announced, but will be no later than Oct. 14.

The Singapore dollar slipped slightly against the U.S. dollar after the manufacturing numbers were released.

(Reporting by Fathin Ungku; editing by Uttaresh.V)

By Fathin Ungku