SINGAPORE (May 25): DBS senior economist Irvin Seah continues to see full-year GDP growth at 2.8% on the premise that global economic conditions continue to improve.

Though there are signs that China consumers demand may wane in the coming quarters, Seah is pinning his hope on stronger capex spending in the US to pick up the slack.

“However, the main worry is that the turnaround thus far has been uneven and restricted to just a few externally driven clusters,” says Seah, “The rest of the economy has yet to feel the uplift and the labour market has also remained soft. Plainly, there are structural challenges weighing down on the domestic sectors and the doldrums is unlikely to dissipate in the near term.”

Sequentially, the economy contracted by a smaller margin of 1.3% q-o-q saar, from 1.9% pre­viously. While the upward revision is in line with Seah’s forecast, the extent of improvement fell “a tad short” of his projection.

(See alsoSingapore economy in 1Q grew by 2.7% on year; FY growth forecast maintained at 1-3%)

The disappointment came from a less than expected upward adjustment in overall services growth, explains Seah. Although the sector posted an expansion of 1.6% y-o-y, it contracted by 2.1% q-o-q saar, dragged down by the wholesale retail trade, accommodation and food services as well as financial services.

The domestic services clusters were mostly weighed down by structural challenges, says Seah. E-commerce has impacted the retail sector while the soft labour outlook is affecting the F&B segment. But for financial services, it is more a case of a technical pullback after a 36.5% surge in the previous quarter. With loan growth and market turnovers rising, Seah says there is a high chance that the sector will flip back to expansion mode in the next quarter.

The manufacturing sector has lived up to expectation with an expansion of 8.0% y-o-y. But a pullback of 1.5% q-o-q saar was registered. Though this was to be ex­pected after a surge of 39.8% in the previous quarter, there are also increasingly signs that the manufacturing rally could be coming to an end, says Seah. PMIs in US and China and recent NODX figures have all fallen in the latest April data set.

Construction services registered a decline of 1.4% y-o-y, mainly due to base effect although the sector expanded by 4.3% q-o-q saar on margins. The main impetus is coming from the slew of infrastructure projects amid the slowdown in residential construction activity, says Seah.