Singapore Widely Misses Growth Targets for Q2

This morning Singapore released its second quarter gross domestic product (GDP) number and it sharply missed expectations. This comes after analysts had already downgraded their projections for the city-state.

Growth, across the board has slowed. The last time this happened was the fourth quarter in 2008 when the Global Financial Crisis was gripping the world. The data will likely mean a further yearly cut in GDP expectations from 2.8 to 2.5 percent.

Singapore’s Ministry of Trade and Industry reported that their GDP contracted by 4.6 percent quarter on quarter for Q2. There was an expectation of a 0.8 percent growth. Last quarter saw a 4.2 percent expansion. For the year, the GDP was up a mere 1.7 percent, well below the expected 2.4 percent and below last quarter’s 2.8 percent. This is the worst print since Q3 2012.

Leading indicators, also are discouraging, as they point to further downside risks over the next several quarters. Households cannot leverage up, there is no bank lending, wages are at zero growth and consumer spending is near zero. This means their central bank is more than likely going to ease policy in October.

Singapore’s 50^th birthday is coming up, bringing good national mood, but economic sentiment is souring rapidly. Their economy is suffering from poor global demand as they are highly exposed to the global business cycle.

The government has a forecast for 2 to 4 percent after growing at 2.8 percent in 2014. The manufacturing sector is fueling the contraction as demand is weak. Pharmaceutical exports are also very weak which fueled the weakness in manufacturing. This is usually a cyclical contraction, so there is some hope it will bounce back.

Data Might not be as Bad as Everyone Thinks

We could see an upward revision as the estimate reflects a very conservative estimate for the service sectors. This sector contracted by 2.6 percent for the quarter. First quarter figures were revised sharply higher, offsetting a lot of the Q2 falloff in economic activity. Net-net the economy saw a marginal decline in the first quarter putting it on target for a 2.4 percent growth rate in 2015. In line with estimates.

There was some positives to note as well as construction is bouncing back. This segment expanded by 2.7 percent for the year even though it contracted quarter on quarter by 0.2 percent.

After the release the Singapore Dollar moved slightly lower against its US Dollar counterpart.