Singapore: Economy surprises market analysts with quicker-than-expected growth in Q1
April 13, 2018
Although economic momentum moderated in the first quarter of the year due to a contraction in services, the pace of expansion beat market expectations. An advanced estimate by the Ministry of Trade and Industry on 13 April showed that the economy grew 1.4% in quarter-on-quarter seasonally-adjusted terms (SAAR), a marked slowdown from the prior quarter’s 3.6% increase. Market analysts had expected a sharper moderation to 1.0% qoq SAAR growth.
Growth in the quarter came chiefly on the back of a strong manufacturing sector, which recorded a 23.3% qoq SAAR expansion. This more than doubled the prior quarter’s 10.1% qoq SAAR increase. The construction sector also chipped in, rebounding from an 8.4% qoq SAAR contraction the fourth quarter of 2017 to a 4.1% qoq SAAR increase in the first quarter of this year. However, growth was dragged down by a marked drop in the services sector, which accounts for roughly two-thirds of the Singaporean economy. Services decreased 2.1 qoq SAAR, contrasting the previous quarter’s 2.8% qoq SAAR increase.
On a year-on-year basis, economic growth shifted into a higher gear and expanded 4.3%, up from the previous quarter’s 3.6% pace of expansion. The result came chiefly on the back of a strong acceleration in activity in manufacturing; growth in the sector more than doubled in the first quarter from the prior one (Q4: +4.8% yoy; Q1: +10.1% yoy). Meanwhile, the services sector logged a small increase from 3.5% yoy in Q4 to 3.8% yoy in Q1. However, the construction sector recorded a fifth consecutive contraction (Q4: -8.4% yoy; Q1: -4.4% yoy).
The first indication of the economy’s performance this year again showed a mixed picture. Export-oriented sectors continue to benefit from the solid global upswing, but this is seemingly slowing somewhat. Although the construction sector continued to limit growth, home sales data for March pointed towards a recovery in the housing market as sales increased at the fastest pace in four months. Moreover, prospects for the rest of the year remain positive with an expected rebound in fixed investment, aided by the government’s measures to help businesses, increase investment and infrastructure expenditure. The government’s robust fiscal and external positions and low tax load should provide necessary room to adapt to changing circumstances. Cooling Chinese demand and weak activity in the construction sector pose downside risks to the economy, however.
Author: Jan Lammersen, Economist