Oct 15, 2014

    Govt measures starting to bite, MTI data shows

    THE latest set of economic numbers released by the Ministry of Trade and Industry (MTI) yesterday morning show that property-cooling measures and foreign-manpower curbs have started to bite, economists said.

    MTI said in its advance estimates that Singapore's gross domestic product expanded 1.2 per cent in the third quarter from the previous three months, after contracting 0.1 per cent in the second quarter.

    "The growth print highlights that the economy progressed from the sharp sequential contraction in the second quarter in manufacturing," noted HSBC economist Joseph Incalcaterra.

    "This was expected, in line with the modest growth seen in July and August industrial production, but comes alongside very weak growth in services."

    MTI noted that overall services growth was muted, as the weakness in global commodity demand weighed on re-export and trade-financing activities.

    Sentiment-sensitive segments within the finance and insurance sector also saw some pullback due to the escalation of geopolitical tensions in Ukraine.

    Some manufacturing firms are facing supply-side constraints and falling product prices, and output could be negatively affected in the short term, MTI added.

    The health-care and education sectors will likely stay resilient, but other segments of services more reliant on labour could experience profit-margin pressures, it said.

    Compared with the same period last year, third-quarter growth came in at 2.4 per cent, which OCBC economist Selena Ling said was below her expectations, as growth in the manufacturing and construction sectors disappointed.

    "Given the somewhat dovish signals from the construction sector, especially from the private-sector construction side, coupled with the still-tight foreign-manpower policy focus on this sector due to its lacklustre labour-productivity performance, there may not be light at the end of the tunnel at this juncture," she said in a note.

    Bank of America Merrill Lynch economist Chua Hak Bin agreed, saying: "Restructuring continues to weigh primarily on manufacturing. Weaker manufacturing is, in turn, hurting exports and trade-related services. Labour-intensive services segments are also feeling the pinch from stricter foreign-labour policies."

    Ms Ling said it is plausible that the construction sector could continue to underperform in the fourth quarter, although recent housing data suggest a stabilisation or mild correction, rather than a bear market.

    "But, depending on the pace and magnitude of the correction in private residential property prices, a partial unwinding of some cooling measures cannot be ruled out from next year to 2016," she added.

    Given that the Singapore economy expanded by 3.2 per cent in the first three quarters of this year over the same period last year, and with fourth-quarter growth tipped at 2.5 per cent over the same quarter a year ago, it looks likely that full-year growth may be closer to 3 per cent than 3.3 per cent as she had initially estimated, Ms Ling said.

    This would be in line with the current 2.5 per cent to 3.5 per cent official growth forecast.