20180713-大华银行-Macro_Note__Singapore__2Q_GDP_Losing_Some_Momentum_2页_229kb

Singapore: 2Q GDP Losing Some Momentum Summary

Core Content

Singapore's second-quarter (2Q) 2018 GDP growth, based on advance estimates, was 3.8% year-over-year (y/y), a slowdown from the previously revised 4.3% y/y in the first quarter (1Q). The growth rate also fell short of the 4.1% y/y consensus estimate. On a quarter-over-quarter (q/q) seasonally adjusted annual rate (SAAR) basis, the growth rate was 1.0%, which is lower than the revised 1.5% in 1Q and the 1.3% consensus.

Main Points

• Manufacturing Sector:
  The manufacturing sector grew at 8.6% y/y in 2Q, down from 9.7% y/y in 1Q. This slowdown is attributed to high base effects from the previous year. However, monthly data shows continued robust expansion, driven by electronics and biomedical manufacturing.

• Services Sector:
  The services sector recorded 3.4% y/y growth in 2Q, a decrease from 4.0% y/y in 1Q. Despite this, q/q SAAR growth improved to 2.5%, rebounding from -1.4% in 1Q, indicating a recovery in growth momentum. The finance & insurance and wholesale & retail trade sectors were key contributors to this growth.

• Construction Sector:
  The construction sector remained weak, with a -4.4% y/y contraction in 2Q, continuing its 8th consecutive quarter of decline. On a q/q SAAR basis, it declined by 14.6%, reversing the 0.9% growth in 1Q. The sector is affected by weakness in both private and public construction activities, although en-bloc activities from 2017 are expected to support private sector construction in the current year.

• Economic Outlook:
  In the previous 1Q GDP report, the author warned that although the growth was strong, growth for the rest of the year could slow due to weaker manufacturing performance and softer Chinese demand. The US-China trade conflict and rising global oil prices pose risks to global financial conditions, which could negatively impact emerging market economies, especially those with high debt levels and twin deficits.

• Domestic Conditions:
  While Singapore's domestic environment remains favourable, the labour market has tightened, raising concerns about increased wage costs. Combined with rising interest rates, this may increase business costs and slow economic growth further.

• GDP Forecast:
  The government's 2018 GDP growth forecast is in the 2.5% to 3.5% range, while the author maintains a forecast of 2.8%.

Key Information

• GDP Growth:

  • 2Q 2018: 3.8% y/y, 1.0% q/q SAAR
  • 1Q 2018 (revised): 4.3% y/y, 1.5% q/q SAAR
  • Consensus estimate for 2Q: 4.1% y/y, 1.3% q/q SAAR

• Sector Performance:

  • Manufacturing: 8.6% y/y, -0.1% q/q SAAR
  • Services: 3.4% y/y, 2.5% q/q SAAR
  • Construction: -4.4% y/y, -14.6% q/q SAAR

• Economic Risks:

  • US-China trade conflict
  • Cost-pushed inflation due to rising oil prices
  • Tighter global financial conditions
  • High debt levels in emerging markets

• Domestic Concerns:

  • Tighter labour market
  • Rising wage costs
  • Higher interest payables due to increased interest rates

• Forecast:

  • Government: 2.5% to 3.5%
  • Author's forecast: 2.8%

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Disclaimer

This document is strictly for informational purposes only and is not intended for distribution or use in any country where it may be illegal. It is not an offer, recommendation, or advice to buy or sell any investment products. The information and opinions are based on publicly available data and current assumptions, and may change with new developments. The views expressed are those of the author and do not reflect the trading positions of the UOB Group. The UOB Group may have different views and interests in the securities mentioned.