Singapore: Economic Growth Slows Alongside Firm Inflation

Consensus Forecasts

Economic activity looks to have softened in February as both trade and output data failed to impress. Most notable, manufacturing activity lost further momentum as output dropped by 16.6% (y-o-y) in February against a marginal contraction of 0.4% in January. This decline was broad-based with all major clusters reporting contractions, partly because of the Lunar New Year holiday which reduced economic activity. Sharp drops were recorded in the biomedical manufacturing (-18.0%) and electronics (-21.1%) sectors, while the chemical and general manufacturing clusters fell by 3.7% and 11.5% respectively. Adding to the downbeat news for manufacturing, February trade data showed that non-oil domestic exports (NODX) plunged by 30.6% (y-o-y), down sharply from marginal growth of 0.4% in January on the back of a contraction in electronic and non-electronic exports. Shipments of electronics fell by 27.4% (y-o-y) in February following a 5.6% drop in January, while non-electronic exports registered a 32% contraction after expanding by 3.7% in the first month of 2013.

As a result of higher food prices and faster growth in private road transport costs, headline inflation leapt to an eight-month high of 4.9% (y-o-y) in February. This follows a 3.6% increase January, and largely stems from a 17.4% jump in private road transport costs. The sharp rise in transport expenses came just before tighter measures on car loans were introduced by the Monetary Authority of Singapore and thus the coming months could see this figure trend lower. Inflation is not expected to accelerate sharply this year and latest forecasts have nudged down slightly this month. However, growth forecasts for 2013 have deteriorated somewhat in our latest survey.

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