UPDATE: Singapore preliminary 3Q GDP growth slows to 2.6 percent, but above forecasts

Singapore two-dollar billsSingapore two-dollar bills

Singapore’s economic growth in the third quarter slowed to 2.6 percent on-year from 4.1 percent in the second quarter, preliminary data from the Ministry of Trade and Industry (MTI) showed on Friday.

That was still above recent economic forecasts. Economists responding to the Monetary Authority of Singapore’s September survey of professional forecasters had expected third quarter gross domestic product (GDP) would grow 2.1 percent on-year.

On an on-quarter seasonally adjusted annualized basis, Singapore’s economy grew 4.7 percent in the third quarter, faster than the second quarter’s 1.2 percent growth, it said.

The preliminary, or advanced, estimate was calculated mainly from data over July and August and is subject to revision, the MIT statement said.

Nomura said that after the first and second quarter GDP data were revised higher, the nine-month GDP growth was at 3.7 percent on-year.

“We see some upside risks to our full-year 2018 GDP growth forecast of 3.0 percent,” Nomura said, pointing to forecasts from Singapore’s central bank on Friday.

MAS tightens policy

In its monetary policy statement on Friday, the Monetary Authority of Singapore (MAS) tightened policy by increasing the slope of its Singapore dollar trading band, citing an expected economic expansion and projections of rising inflation.

It forecast that GDP growth would be in the upper half of its 2.5 percent to 3.5 percent forecast range for this year, and then moderate slightly next year.

“Barring a significant setback in global growth, the Singapore economy should expand at a pace close to potential in 2019,” the MAS said in its statement. “Although manufacturing will remain an important driver of GDP growth, its contribution will moderate. The ICT, financial and business services sectors will benefit from steady regional growth and domestic digitalisation efforts, while the discretionary services sectors, such as retail and food services, should see some recovery.”

The dollar/Singapore dollar was at 1.3736 at 10:41 A.M. SGT, down from as high as 1.3767 before Singapore gross domestic product data and the MAS announcement were released, but off the low of 1.3728 after the announcements. The pair had fallen from levels as high as 1.3839 on Thursday as the U.S. dollar weakened.

Manufacturing

Singapore’s manufacturing GDP grew 4.5 percent on-year in the third quarter, slowing from the second quarter’s 10.6 percent growth and from 2017’s third quarter growth of 19.1 percent, the statement said.

“Growth was supported mainly by output expansions in the electronics, biomedical manufacturing and transport engineering clusters,” MTI said.

On an on-quarter seasonally adjusted annualized basis, the manufacturing sector grew 7.6 percent in the third quarter, up from 2.9 percent in the second quarter, it said.

The MAS also pointed to a slowing manufacturing sector in its statement.

“Over the last six months, the drivers of economic activity have shifted. The contribution of the manufacturing sector to Singapore’s GDP growth has waned following several quarters of above-trend expansions. This has largely reflected the maturing of the global electronics cycle,” the MAS said.

Construction

The construction sector contracted 3.1 percent on-year in the third quarter, extending the second quarter’s 4.2 percent decline, it said.

“The sector was weighed down by the weakness in public sector construction activities,” it said.

On an on-quarter seasonally adjusted annualized basis, the construction sector grew 1.7 percent in the third quarter, after contracting 14.5 percent in the second quarter, it said.

Services

The services sector grew 2.9 percent on-year in the third quarter, steady with the second quarter, largely supported by the finance and insurance, business services and wholesale and retail trade sectors, it said.

On an on-quarter seasonally adjusted annualized basis, the services sector grew 6.3 percent in the third quarter, faster than the second quarter’s 0.7 percent growth, MTI said.

This article was originally published on Friday 12 October 2018 at 9:16 A.M. SGT; it has since been updated. 

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