Singapore GDP Rises in Second Quarter Amid Modest Global Recovery

Amid modest globaly recovery, the Singapore economy grew by 2.4 percent on a year-on-year basis in the second quarter, moderating from the 4.8 percent growth in the previous quarter, according to the Ministry of Trade and Industry.

On a quarter-on-quarter annualised basis, the economy expanded by 0.1 percent, slower than the 1.8 percent growth in the preceding quarter.

The Singapore economy is expected to grow at a modest pace in 2014. In particular, externally-oriented sectors such as finance & insurance and wholesale trade are likely to support growth in the second half of the year, in tandem with the modest pick-up in the global economy.

Domestically-oriented sectors such as business services and information & communications are also expected to remain resilient in the second half of 2014.

However, growth in some labour-intensive segments such as retail and food services may be weighed down by labour constraints.

Taking these factors into consideration, the 2014 growth forecast for the Singapore economy is narrowed to 2.5 to 3.5 percent.

Sharp slowdown in manufacturing sector

The manufacturing sector grew by 1.5 percent year-on-year in the second quarter, a sharp slowdown from the 9.9 percent expansion in the preceding quarter.

The deceleration in growth was largely due to a contraction in electronics output and slower growth in transport engineering output.

On a quarter-on-quarter basis, the sector contracted at an annualised rate of 15.2 percent, a reversal from the 12.3 percent growth in the previous quarter.

The construction sector grew at a slower pace of 4.4 percent year-on-year in the second quarter, compared to the 6.4 percent growth in the preceding quarter.

The slowdown was driven mainly by a fall in private construction output, reflecting weaker private residential building works and a decline in private commercial and industrial building works.

On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 0.3 percent, a marginal improvement from the 0.5 percent contraction in the first quarter.

Wholesale & retail trade sector expands

In the second quarter, the wholesale & retail trade sector grew by 1.7 percent year-on-year, slower than the 3.8 percent expansion in the preceding quarter. This was largely due to weaker growth in the wholesale trade segment, which came on the back of a moderation in non-oil re-exports growth.

On a quarter-on-quarter basis, the sector grew at an annualised rate of 3.3 percent, reversing the 5.3 percent contraction in the first quarter.

Growth in the transportation & storage sector slowed to 2.0 percent on a year-on-year basis, from 5.5 percent in the first quarter, weighed down by slower growth in the water transport segment.

On a quarter-on-quarter seasonally-adjusted annualised basis, the sector contracted by 1.6 percent in the second quarter compared to the 3.3 percent decline in the previous quarter.

The finance & insurance sector expanded by 5.5 percent year-on-year in the second quarter, largely similar to the 5.7 percent growth recorded in the previous quarter.

Growth was supported by the core financial intermediation and insurance segments. On a quarter-on-quarter seasonally-adjusted annualised basis, the growth of the sector accelerated to 11.6 percent from 4.6 percent in the previous quarter.

The business services sector expanded at a slower pace of 2.3 percent year-on-year compared to 3.3 percent in the first quarter. The slowdown in growth was largely due to significantly weaker growth in the rental and leasing segment.

On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 1.4 percent in the second quarter, reversing the 1.7 percent contraction in the preceding quarter.

Growth in the accommodation & food services sector slowed to 0.5 percent year-on-year from 2.1 percent in the first quarter, due to weaker expansion in the accommodation segment.

On a quarter-on-quarter basis, the sector contracted at an annualised rate of 1.6 percent, in contrast to the growth of 1.6 percent in the previous quarter.

The “other services industries” grew by 2.6 percent year-on-year in the second quarter, slightly faster than the 2.2 percent expansion in the preceding quarter. This came on the back of stronger growth in the education, health and social services segment.

On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 8.9 percent, rebounding from the 1.1 percent decline in the previous quarter.

Global economic outlook

While global growth in the first quarter of the year turned out weaker than expected, recent incoming data suggest that global economic activities are recovering modestly.

Economic activities in the US improved in the second quarter following harsh weather conditions in the first quarter.

For the rest of the year, the US economy is expected to grow at a slightly faster pace, supported primarily by private domestic demand.

In Asia, the Chinese economy is expected to maintain a similar pace of growth in the second half of 2014, with recent support measures introduced by the government helping to partially offset the drag posed by tighter regulations to rein in shadow banking activities.

Meanwhile, key ASEAN economies like Malaysia and Indonesia are expected to remain resilient, supported by robust domestic demand.

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