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Singapore's GDP has been growing, this means that in Singapore's economy, more goods and services are being produced. This article analyzes which main sectors in Singapore's GDP have been growing or shrinking, as well as comparing them to the previous quarters to see any changes in the sector as a whole.
The article also analyses why it is important to not rely too heavily on quarterly statistics for use in speculation of future indications of GDP, as it may not be accurate and might just be a one-off thing. The article also talks about how different global events may affect Singapore's GDP, such as Britain's Brexit policy.

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Singapore's economy expanded a faster-than-expected 1.8 per cent in the final three months of 2016, putting growth for the whole year at 1.8 per cent, according to advance estimates released by the Ministry of Trade and Industry on Tuesday (Jan 3).

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SINGAPORE: The Singapore economy expanded at a faster-than-expected 1.8 per cent on a year-on-year basis in the final three months of 2016, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Tuesday (Jan 3).

This was more than the revised 1.2 per cent growth in the third quarter.

On a quarter-on-quarter seasonally-adjusted basis, gross domestic product (GDP) grew 9.1 per cent, marking a reversal from the 1.9 per cent contraction in the July to September period and dodging a technical recession defined as two straight quarters of declines in economic output.

Analysts have earlier put forth expectations for the economy to avert a technical recession, following a jump in industrial production in November. Economists surveyed by Reuters had forecast Singapore's fourth-quarter GDP to grow 3.7 per cent from the previous three months on an annualised basis and 0.6 per cent on a year-on-year basis.

STRONG MANUFACTURING, SERVICES PROPPED UP GROWTH
This quicker-than-expected pace of growth brought full-year GDP growth to 1.8 per cent, above the Government's forecast for 2016 growth to be between 1.0 and 1.5 per cent.

However, this marks Singapore's weakest annual rate of growth since 2009, when the economy was hit by the global financial crisis and shrank 0.6 per cent. Last year, the economy grew 2 per cent.

Strong improvements in the manufacturing and services sectors helped to underpin growth in the final quarter of 2016.

The manufacturing sector, which makes up a fifth of Singapore's economy, expanded 6.5 per cent on a year-on-year basis, way higher than the 1.7 per cent growth in the previous quarter. Growth was primarily driven by the electronics and biomedical manufacturing clusters, even as the transport engineering and general manufacturing clusters continued to contract, MTI said.

Compared to the previous three months on a seasonally-annualised basis, the sector grew by 14.6 per cent in the fourth quarter, marking a sharp turnaround from the 8.1 per cent contraction in the July to September period.

Growth in the services producing industries came in at 0.6 per cent from a year ago, slightly faster than the 0.3 per cent growth in the previous quarter. Support came from the "other services industries", transportation & storage and business services sectors, according to the Trade Ministry.

On a quarter-on-quarter basis, the services producing industries staged a massive rebound with expansion at an annualised rate of 9.4 per cent, a reversal from the 0.4 per cent contraction in the third quarter.

"The services sector has officially ended its technical recession," said a note from DBS, following the data release. "Accounting for about two-third of GDP and employment, this sector has always been the main driver of the economy. And as mentioned in many of our past writings, if the services sector turns, the economy turns along with it."

STILL WARY OF ECONOMY'S OUTLOOK IN 2017: ANALYSTS
The construction sector was the sole underperformer during the October to December period, with a contraction of 2.8 per cent on a year-on-year basis, extending the 0.2 per cent decline in the previous quarter. The contraction was largely due to the decline in private sector construction activities, MTI said.

However, on a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 4.7 per cent, moderating from the 14.8 per cent contraction in the preceding quarter.

But moving forward, the outlook for Singapore's economy remains cloudy.

Describing the fourth-quarter numbers as "a bit too good to be true", Nomura economist Brian Tan said he is cautious over the sustainability of the GDP figures given the host of external and domestic downside risks that lie ahead.

For one, economic growth worldwide continues to be anaemic and global trade is shrouded with uncertainty as the United States threatens to embrace a protectionist stance on trade under President-elect Donald Trump.

Over in Europe, geopolitical risks continue to linger, with elections due in Germany and France and as Britain proceeds with its exit from the European Union. "We will likely get more clarity on Brexit this year and if things appear to be moving towards a hard Brexit, that could take a toll on global sentiment and Singapore won't be spared," Mr Tan said.

Meanwhile, a growth slowdown persists in China as the world's second-biggest economy transitions from an export-driven to a consumption-driven model. With China being a major trading partner of Singapore, the continued moderation in growth figures which translates into diminishing demand, will be keenly eyed, Phillip Futures' investment analyst Woon Tian Yong told Channel NewsAsia.

Back home, downside risks such as a weak property market, ongoing economic restructuring efforts and rising local interest rates given the US Federal Reserve's indication for more aggressive rate hikes this year will likely continue to weigh on growth, analysts said.

"The Monetary Authority of Singapore's (MAS) managed exchange rate regime ties interest rates in Singapore fairly closely to the Fed funds rate. Higher borrowing costs are likely to weigh on household and business spending, weaken the housing market further and dampen construction activity," Capital Economics' Krystal Tan said.

For 2017, Mr Tan from Nomura is predicting Singapore's economic growth to come in at 0.7 per cent, way below the Government's forecast for growth to be between 1 and 3 per cent.

Ms Selena Ling, OCBC Bank's head of treasury research & strategy, expects next year's GDP growth to be rangebound at around 1 to 2 per cent.

"The tide is gradually turning for 2017, with the long-awaited domestic manufacturing recovery finally taking root," Ms Ling said. "However, the 2017 outlook remains tentative ... amid key uncertainties like the Trump presidency potentially having spillover effects for global trade, China's slowdown, and heightened market volatility, especially on the currency and interest rate front, potentially weighing on corporate and consumer confidence."

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Singapore's economy grows 1.8% in Q4; 2016 GDP at 1.8%

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Singapore's economy expanded a faster-than-expected 1.8 per cent in the final three months of 2016, putting growth for the whole year at 1.8 per cent, according to advance estimates released by the Ministry of Trade and Industry on Tuesday (Jan 3).

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Singapore's economy has been undergoing a long period of negative inflation, which has only just begun to stabilize. This article analyzes the reason behind the uptick in inflation, the sustainability of the reverse in inflation, as well as the impact it will have on consumers as well as industries.

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Singapore's consumer price index (CPI) ended its longest stretch of decline last month, with one analyst calling it an "important milestone". What was behind the record streak of falling prices? And what does it mean for Singaporeans, now that inflation is out of contraction territory?

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SINGAPORE: After a record 24 straight months of negative readings, consumer prices in Singapore have finally stopped falling.

Data released last Friday (Dec 23) showed the consumer price index (CPI), a measure of headline inflation, flat at zero per cent in November from a year ago.
Q: What's behind the long spell of negative inflation?
The latest reading, which was in line with analysts' expectations as polled by Reuters, officially put an end to Singapore's longest period of negative price growth.

But what was to blame for the record streak of falling prices? Now with inflation out of contraction territory, what does that entail for consumers in Singapore? We ask the experts.

For one, the dramatic fall in the price of crude oil, which holds sway over direct oil-related items such as petrol and electricity in the CPI basket and is an input to nearly all economic activity, noted CIMB Private Banking economist Song Seng Wun.

But the biggest contributors are the declines in accommodation and private transport costs, following the Government's introduction of cooling measures to the housing and motor vehicle markets. Accounting for more than one-third of headline inflation in total, cheaper certificate of entitlement (COE) premiums for cars and decreasing home rents have led consumer prices down its longest stretch of declines, Mr Song added.

While the record streak of negative inflation sounds distressing, economists told Channel NewsAsia that the situation this time round is different compared to previous bouts of price declines such as in 1975 when the CPI logged 16 consecutive months of contraction amid a global recession.

Singapore is also far from succumbing to the deflationary spiral in Japan, which has struggled to stoke inflation and encourage spending even with the Bank of Japan's (BOJ) roll-out of quantitative and qualitative easing (QQE) policies.

One piece of evidence would be the price of daily necessities, including food, healthcare and education, which have continued to rise over the past two years, pointed out Nomura economist Brian Tan.
Q: What is behind the uptick in inflation now?
"Large declines in the two main items - private road transport and accommodation - have dragged down the overall index by offsetting increases in other parts of the basket. That is why we have been seeing the dichotomy in headline and core inflation," said Mr Tan, referring to the core inflation measure, which excludes accommodation and private road transport costs.

Even as headline inflation contracted, core inflation remained in positive territory and in November, edged up to 1.3 per cent from October's 1.1 per cent.

Apart from a dissipating effect from COE prices on the CPI basket due to smaller declines, a recovery in commodity prices and expectations for improved global growth in 2017 have helped Singapore to emerge from 24 months of price declines.

"Recently, we've seen commodity and metal prices becoming more expensive. These are inputs for production and eventually will work into the final cost of goods and services here in Singapore," Mr Song said.
Q: Will this be sustainable?
The veteran economist added: "To some extent, these higher prices are in anticipation of stronger demand in the coming year. There's the expectation for further stimulus from President-elect Donald Trump to 'make America great again' and the assumption that the second-biggest economy China remains on a stable footing.

"If these expectations are realised and demand starts to improve, consumer prices will be pulled along. For Singapore, which imports almost everything, these tentative signs of green shoots could push prices higher."

According to economists who Channel NewsAsia spoke to, the answer seems to be yes.

UOB economist Francis Tan described the non-negative reading in November as an "important milestone". "It shows that we may start to experience some inflation in 2017; some inflation is good as it could signal stronger demand."

Separate data released last Friday also showed manufacturing output up 11.9 per cent from a year earlier in November, marking its fastest pace of increase since March 2014. Mr Tan said that may indicate "some uplift in global demand", which would be accompanied by "demand-pulled" inflation.

Should this scenario persist, the Singapore economy could well be on a "re-flationary" cycle. As such, the UOB economist is maintaining his forecast for headline inflation to average 0.5 per cent and core inflation to be at 1.3 per cent next year.

Similarly, Nomura's Mr Tan expects the all-items index to rise to 0.5 per cent and the core inflation measure to increase to 1.5 per cent in 2017. "This little bit of inflation will be a good thing because it tells you that the economy is chugging along well enough and there are symptoms of demand," he said.

Government forecasters are also expecting the inflation picture to be less benign in the year to come.
Q: Will this sway MAS' actions?
"MAS core inflation is expected to average around 1 per cent in 2016 before rising to 1 to 2 per cent next year. Energy-related components are projected to contribute positively to inflation in 2017, while the temporary disinflationary effects from budgetary measures will fade," the joint statement from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) dated Dec 22 said.

"However, the increase in core inflation will be gradual, given the absence of more generalised demand-induced price pressures. CPI all-items inflation has troughed and is projected to pick up to 0.5 to 1.5 per cent next year, from around -0.5 per cent in 2016, largely reflecting the rise in private road transport cost."

UOB's Mr Tan thinks the central bank is likely to adopt a "wait-and-see" approach and maintain its neutral policy stance at the next monetary policy meeting April 2017. However, if there are upside surprises in the core inflation measure, there may be "some pressure for the central bank to introduce some appreciation to the S$NEER (Singapore dollar nominal effective exchange rate) slope, especially since the US Federal Reserve looks more hawkish than ever for 2017 at their latest meeting", he said.

Analysts have largely expected a deteriorating growth outlook to force the MAS to ease at its next review in April 2017 after it kept its exchange-rate based policy unchanged in October.
Q: What does it mean for consumers like you and me?

A wet market in Singapore. (AFP/Roslan Rahman)

Even as the CPI index was stuck in disinflationary trend for the past two years, everyday expenses for the man in the street have not come down in tandem. Economists say this disparity between the headline inflation figure and what the ordinary Singaporean may feel boils down to the weightage of the items in the CPI basket.

"We have been seeing deflation in prices of goods and services that we don't consume everyday, such as COE prices. With more than 80 per cent of the population owning an HDB flat, you don't feel the impact of weaker rentals and that's why Singaporeans in general still feel that they are paying more," Mr Song said.

The pain is especially felt in expenses relating to food and healthcare services, he added. "You can complain about how your cup of 'kopi' is no longer 90 cents... That's because food inflation remains and has been rising."

Now with inflation emerging out of contraction territory, does it mean that consumers may start feeling the effect on their wallets?

"That will depend on various factors. For your daily 'kopi', prices will depend on global coffee prices, shipping costs and whether the coffee shop is paying more to hire foreign workers," Mr Song said.

One thing is for sure - while you may not see an increase in the price of your daily cup of coffee just yet, households should expect a rise in utility costs in the year ahead given the recovery in global oil prices, economists said.

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Breaking Singapore's record streak of negative inflation: 5 key questions

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Singapore's consumer price index (CPI) ended its longest stretch of decline last month, with one analyst calling it an "important milestone". What was behind the record streak of falling prices? And what does it mean for Singaporeans, now that inflation is out of contraction territory?

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"Singapore economy is increasingly moving towards higher value-added, niche sectors - such as medical technology and data analytics"- This means that Singapore is facing Structural unemployment due to the introduction of these new labour saving technologies and there is a mismatch in the skills of workers and skills required for the job
"look into rewarding employers" - Means that the firms are trying to give employment incentives to increase employment rate

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Singapore's labour market faces challenging times ahead, and not just because of the slowing economy.

The lacklustre sentiment has stunted job creation and prompted a wave of layoffs in the hardest-hit sectors, but more worrying is the prospect that an unemployment rate higher than what Singaporeans are used to might become the new normal.

Singapore's unemployment rate - which now stands at 2.1 per cent - has for decades been low by international standards.

But it might be on track to rise in the face of unrelenting technological change that leaves old skills outmoded. The ones relevant to new realities may take a while to acquire.

In the short run, the slowing economy will remain a key contributor to downbeat labour market sentiment.

Data out yesterday showed that total employment fell for the second time since the 2009 global financial crisis.

Layoffs fell slightly in the third quarter to 4,100, down from 4,800 in the previous three months.

But with "subdued global economic conditions and internal economic restructuring", more workers were affected than the 3,460 who lost their jobs in the third quarter a year ago, said the Ministry of Manpower.

Beyond the current downturn, however, some structural challenges will persist for a longer time - including the gulf between the skills workers have and the ones that employers want.

In its latest macroeconomic review, the Monetary Authority of Singapore said skills mismatches in the labour market are on the rise.

These are leaving laid-off workers - especially professionals, managers, executives and technicians (PMET) - struggling to find new jobs, the central bank noted.

Disruptive change has hit almost every industry, and jobs are evolving faster than ever.

In addition, the Singapore economy is increasingly moving towards higher value-added, niche sectors - such as medical technology and data analytics - in a bid to maintain its competitive edge.

These provide good jobs, but require specialised skills that most retrenched PMETs do not have.

These industries also offer fewer jobs, given their small, specialised nature.

This means Singapore might have to get used to a higher rate of structural unemployment - caused by a mismatch between workers' skills and those demanded by employers.

To adapt, workers can keep a lookout for opportunities to deepen and extend their own skills, said SIM University economist Walter Theseira.

"It is going to be very hard for the Government or employers to force workers down a particular skills pathway, because everyone has different abilities and it won't work if you force people to take up training that they are not interested in or unsuited for."

Dr Theseira suggested that policymakers aim to ease this "adjustment burden" by subsidising wage costs.

"I would also look into rewarding employers who do actually show willingness to take on middle-aged and older PMETs, because our economy needs the contributions from our mature workers.

"We can't afford to have persistent long-term unemployment of our skilled workers," he added.

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Tech disruption may push up unemployment rate

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Singapore's labour market faces challenging times ahead, and not just because of the slowing economy. The lacklustre sentiment has stunted job creation and prompted a wave of layoffs in the hardest-hit sectors, but more worrying is the prospect that an unemployment rate higher than what Singaporeans are used to might become the new normal.