Singaporean economy expands in second quarter on rebound in services sector

Based on advance estimates, the Singaporean economy expanded 2.2 percent on year-on-year basis in the second quarter of 2016, according to the Ministry of Trade and Industry. The second quarter’s growth is slightly higher than the 2.1 percent growth in the first quarter of this year. On a sequential seasonally adjusted basis, Singapore’s economy grew 0.8 percent, as compared with the 0.2 percent expansion recorded in the first quarter of 2016.

But, this acceleration was mainly because of an improvement in the services sector, concealing the diminishing momentum in manufacturing and construction activities, noted ANZ in a research report. On a sequential basis, manufacturing sector slowed sharply in the second quarter, growing 0.3 percent, as compared with first quarter’s growth of 18.4 percent.

However, on a year-on-year basis, the sector recorded a growth of 0.8 percent, as compared with the year-on-year growth of 0.5 percent in the first quarter. The growth in manufacturing sector was underpinned by the rise in biomedical manufacturing and electronics clusters output.

Meanwhile, services growth continued to be resilient in the second quarter. It expanded 1.7 percent year-on-year, the same pace recorded in the first quarter. Wholesale, retail trade, and transport and storage sectors underpinned the growth in services sector. On a sequential basis, the sector grew 0.5 percent, as compared with 4.8 percent contraction recorded in the first quarter.

The construction sector expanded 2.7 percent year-on-year in the second quarter, slowing from the 4.5 percent growth recorded in the first quarter. The slowdown was due to deceleration in private sector construction activities. On sequential basis, the sector grew 0.6 percent, a slowdown from 3.5 percent recorded in the previous quarter.

The risk of subdued weakness outside of Singapore spilling into domestic activity is expected to remain a drag on the labor market, weakening both inflation and growth outlook,  noted ANZ in a research report.