Data released yesterday showed that Singapore’s economy expanded at its fastest pace of 5.2 percent year-on-year in more than three years in the third quarter, versus a median estimate of 5 percent, and that the recovery has broadened out from export industries to the services sector.
GDP rose seasonally adjusted, annualized 8.8 percent from the previous quarter, higher than an earlier estimate of 6.3 percent, and the government raised its forecast for growth this year to as much as 3.5 percent from 2 to 3 percent, and up to 3.5 percent for next year.
The labor market remains somewhat weak amid sluggish hiring, although it showed improvement in the third quarter from earlier this year.
The Monetary Authority of Singapore (MAS), the city-state’s central bank, and the Singaporean Ministry of Trade and Industry said in a joint report that wage pressures would remain subdued in the near term as previous slack in the economy is absorbed.
The central bank left its policy stance unchanged last month, but gave itself room to tighten if necessary, MAS Deputy Managing Director Jacqueline Loh (羅惠燕) told reporters, adding that last month’s stance remains appropriate and that the regulator would continue to monitor developments.
A separate report showed that the consumer price index (CPI) continued to pick up, although it remained moderate. The CPI rose 0.4 percent compared with a median estimate of 0.5 percent, with core CPI rising 1.5 percent, in line with analysts’ estimates.
Singapore’s export growth is set to taper off next year, with International Enterprise Singapore, the government’s trade promotion body, forecasting an expansion of zero to 2 percent next year, compared with the estimated 6.5 to 7 percent for this year.
Bloomberg economist Tamara Henderson said that on a GDP-expenditure comparison, net exports were a slightly stronger drag on growth, but that this was offset by much stronger household spending.
Public spending was also much stronger, and the contraction in investment was not as large, Henderson said, adding that if this is sustained in this quarter and next quarter, the central bank is likely to dial back its monetary stimulus.
Government data showed that manufacturing surged almost 35 percent in the third quarter from the previous three months, while the services industry grew an annualized 3.2 percent.
Construction continued to suffer, contracting for a third quarter by 5.3 percent, the data showed.
“We also see signs that the recovery is broadening,” with business services and retail looking better even though growth in the third quarter was “primarily supported by manufacturing,” Singaporean Ministry of Trade and Industry Permanent Secretary Loh Khum Yean (羅錦賢) told reporters.
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