What Singapore Tells Us About the Global Economy -- Update
Singapore, viewed as bellwether of global trade, said its economy grew at a sharply faster pace in the third quarter, driven by a surging manufacturing sector and strong demand for technology.
The city-state posted a 6.3% rise in gross domestic product on a seasonally adjusted and annualized basis compared with the previous quarter, according to advance government estimates Friday. The data marked a sharp acceleration from revised growth of 2.4% in the in the previous three months and was almost twice the pace forecast by economists.
The manufacturing-fueled expansion comes as tech-producing nations around Asia report a jump in exports as the global electronics cycle picks up speed. Launches of new smartphones by Apple Inc. and Samsung Electronics Co. have helped companies in Asia that supply components for electronic products. Recent data from South Korea, Taiwan and Malaysia all point to a swell in tech output and also strength in demand from the Chinese economy.
On Friday, China reported that exports grew for a seventh straight month in September, rising 8.1% from a year earlier. The country's imports, meanwhile, have been growing at a double-digit pace since January.
Despite the upbeat economic data, the Monetary Authority of Singapore, the city-state's central bank, kept a measured view, saying that the outlook for the economy and inflation was now moderate rather than subdued.
MAS said it would keep the local dollar's nominal effective exchange-rate band at zero-appreciation, but it stopped short of telegraphing a likely change in policy to come. Singapore manages monetary policy through exchange-rate settings, rather than interest rates, as external trade dwarfs the island nation's economy.
The central bank has kept a neutral policy stance since April 2016.
Many analysts predict the electronics cycle will weaken in the coming months, while others point to policy-tightening overseas as a factor that could weigh on growth.
"It is only logical to expect growth to moderate against the backdrop of a normalization in global monetary policies," DBS Bank economists said, predicting GDP growth will soften to 2.5% in 2018 after rising 2.8% this year. Measured on a year-over-year basis, the nation's economy is estimated to have expanded 4.6% in the July-to-September quarter from a year earlier, the best result in three years.
The central bank said GDP growth this year would likely reach the upper half of the 2%-3% range forecast earlier by the authorities. "In 2018, economic growth is expected to remain firm though it could moderate from this year," MAS said.
Recent data have shown that other segments of manufacturing in Singapore such as offshore and marine may be picking up, though they are still caught in the slow lane.
"Offshore and marine is probably past its worst and will probably be less of a drag on growth in 2018," said Chua Hak Bin, senior economist at Maybank Kim Eng Research.
Write to Saurabh Chaturvedi at Saurabh.Chaturvedi@wsj.com and Gaurav Raghuvanshi at gaurav.raghuvanshi@wsj.com
(END) Dow Jones Newswires
October 13, 2017 01:08 ET (05:08 GMT)