Manufacturing helps drive strong Q3 growth
Advance data shows economy expanded at fastest pace since 2014, beating forecasts
The economy expanded at its fastest pace in more than three years in the July to September quarter, buoyed by the surging manufacturing sector.
Despite the strong showing, the central bank opted to keep its exchange rate policy stance un- changed, but said that it expects more stable and even growth in the coming year.
The economy expanded 4.6 per cent in the third quarter compared with the same period a year earlier, according to Trade and Industry Ministry advance estimates released yesterday, which take into account data from the first two months of the quarter.
This beat economist forecasts of 3.8 per cent growth, and was also the fastest quarterly expansion since 2014.
The better-than-expected performance was lifted by a stellar showing in manufacturing, which surged 15.5 per cent over the same period a year earlier. The sector, which makes up a fifth of the economy, has been its brightest spot this year, thanks to strong global demand for semiconductors and related gear.
Services – which makes up twothirds of the economy and employs the bulk of workers – grew 2.6 per cent, boosted largely by trade-related segments such as finance and insurance, wholesale and retail trade and transportation and storage.
But the construction sector shrank 6.3 per cent year on year, amid lacklustre private-sector building activity.
“The main story behind the economic growth numbers is that recovery is broadening out,” said DBS senior economist Irvin Seah.
“Third-quarter growth will likely be the strongest this year. Growth could ease a tad in the coming quarters as the economy shifts from a recovery to a normalisation phase.”
The Monetary Authority of Singapore (MAS) struck a more upbeat note in its latest policy statement, which was also released yesterday, even as it announced that it is keeping its policy stance unchanged.
The central bank uses the exchange rate as its main monetary policy tool to strike a balance between inflation from overseas and economic growth. The rate is allowed to float within a band that can be adjusted when monetary policy is reviewed.
The Singapore dollar band is now on a path of zero appreciation against the currencies of key trading partners – a “neutral” policy stance put in place in April last year amid slow growth and low inflation.
The economy has performed “slightly better than expected” since its last policy review, MAS noted. It expects growth to come in at a steady, but slightly slower, pace next year compared with this year, as the global economic recovery enters a more mature phase.
Growth should also become more even across sectors in the coming quarters, as the boost from electronics moderates while the pace of con- traction in other sectors levels off.
MAS added that economic expansion this year and next will be driven by productivity gains.
Core inflation, another key factor that goes into monetary policy decisions, will also inch up next year. It is expected to come in at around 1.5 per cent this year, and average 1 per cent to 2 per cent next year.
Yesterday’s stronger data led some economists to revise their forecasts for full-year economic growth upwards, with some saying it could come in above the official forecast range of 2 per cent to 3 per cent.