Stronger services lift for Singapore's Q3 GDP prevents technical recession

Singapore's Final Q3 GDp's preliminary release was revised up to 1.9q/q saar from 0.1% in the advance estimate, which was better than the anticiaption of being flat. Growth was revised up to 1.9% from 1.4% on y/y basis.

A sharper than predicted revision to the service sector led to a better out turn, the services output being expanded by 3.5% q/q saar. This has offset the marginal downward revision to the manufacturing sector that dropped to 4.6%q/q saar, which slipped from -3.6% in the advance estimate.

"Given today's upside surprise in the Q3 growth outturn, we fine tune our 2015 growth forecast, raising it 20bp, to 2.0% y/y, but leave our 2016 growth projection unchanged at 2.5%", says Barclays in a research note.

In its press release, the Ministry of Trade and Industry said it expects the economy to grow by "close to 2.0%" for 2015, which indicates there was no material change in their growth assessment. 

The ministry expects growth to improve modestly. In line with a more modest growth outlook, the MTI expects GDP to grow at a more circumspect 1-3% in 2016 (as opposed to 2-4%), which assumes no meaningful lift in external demand. 

Key medium term core inflation driver, the tight labor market is the main focus of MAS. No policy change seems likely in the April MAS meeting, unless any systemic shock comes up.