SINGAPORE (July 14): Singapore’s economy grew 2.5% y-o-y in the second quarter of 2017, at the same pace of growth in 1Q17, based on the latest advance estimates from the Ministry of Trade and Industry (MTI).  

On a q-o-q seasonally-adjusted annualised basis, the economy expanded by 0.4%, in contrast to the 1.9% contraction in the preceding quarter.

The advance GDP estimates for 2Q17 are computed largely from data in April and May 2017, and are intended as an early indication of the GDP growth in the quarter.

According to MTI, the manufacturing sector expanded 8% y-o-y in 2Q, down from the 8.5% reported in the previous quarter.

Growth was supported mainly by the electronics and precision engineering clusters, which saw robust expansions on the back of strong external demand for semiconductors and semiconductor manufacturing equipment respectively.

On a q-o-q seasonally-adjusted annualised basis, the sector grew by 2.4%, an improvement from the 0.4% growth in the preceding quarter.

On the other hand, the construction sector contracted by 5.6% y-o-y in the second quarter, following the 6.1% decline in the previous quarter on weakness in both private sector and public sector construction activities.

The sector rebounded to grow by 4.3% on a q-o-q seasonally-adjusted annualised basis, compared to the 14.4 per cent contraction in the preceding quarter.

Meanwhile, the services producing industries grew by 1.7% y-o-y for 2Q, faster than the 1.4% growth in the previous quarter. Growth was supported primarily by the transportation & storage and business services sectors.

It expanded by 0.4% on a q-o-q seasonally-adjusted annualised basis, a reversal from the 2.7% contraction in the preceding quarter.

MTI will release the preliminary GDP estimates for 2Q – including performance by sectors, sources of growth, inflation, employment and productivity – in its Economic Survey of Singapore in August 2017.

The latest 2Q advance estimates from MTI, particularly the 0.4% q-o-q expansion of the economy in 2Q on a seasonally adjusted basis, have disappointed consensus expectations of a 1.1% growth q-o-q on a seasonally adjusted annual rate. 

In HSBC Global Research's view, the miss in 2Q GDP was due to weak serviceis output, which likely reflects tepid private consumption and a deceleration in wage growth despite a resilient manufacturing industry. 

“MTI appears to assume a strong rebound in June IP – a plausible assumption given the optimistic outlook for the semiconductor industry – but any disappointment in the data could lead to a downward revision in the final 2Q GDP print,” notes HSBC economist Joseph Incalcaterra in a report on Friday.

The bank is forecasting MAS to maintain a neutral monetary policy through 2017.

“All in all, GDP in Singapore should remain strong this year (we forecast 2.5%), but the data points to the continuation of a ‘two-speed economy’ where growth in external industries is showing scant evidence of filtering through to the domestic economy,” he adds.