Singapore's growth rate: 7 percent but slowing
The forecast for Singapore's growth in gross domestic product has been revised upward, with the purchasing managers' index (PMI) continuing to indicate expansion in manufacturing. However, there are also indications that the pace of expansion may slow in the coming months.
According to the latest survey of private-sector forecasters published by the Monetary Authority of Singapore (MAS) on 3 June, Singapore's gross domestic product will grow by 7 percent this year. This compares with a median forecast of 5.5 percent in the previous survey in March.
On 17 May, the Ministry of Trade and Industry had raised its forecast for Singapore's economic growth to between 5.5 and 7.5 percent, up from 3.5 to 5.5 percent earlier.
The PMI reported by the Singapore Institute of Purchasing & Materials Management (SIPMM) also indicates good growth ahead, with a reading of 55.7 for May, up half a point from the previous month. It was the twelfth consecutive month that the PMI has been above 50, the threshold for indicating an expansion in manufacturing.
And just for good measure, on Friday, the US Labor Department reported that the economy added 248,000 jobs in May. Job gains in April and March were revised upward to 346,000 and 353,000 respectively.
However, the jobs data is widely acknowledged as a lagging economic indicator. Among the leading indicators is growth in new orders. Here, the picture is less rosy.
Among the sub-indices reported by the SIPMM last month, the electronics new orders sub-index fell 4.4 points from the previous month to 55. The electronics new export orders contributed the bulk of the fall, down 6.2 points from the previous month to 54.4.
In the US, the Commerce Department also reported last week that new orders at US factories fell 1.7 percent in April.
The forecasters surveyed by the MAS also expected a slowdown. Their median forecast was for the Singapore economy to peak at 10.3 percent growth year-on-year in the second quarter, before falling to 6.1 and 4.6 percent in the third and fourth quarters respectively.
Further downside to economic growth this year, however, may be limited. According to the MAS report, higher oil prices, hikes in US interest rates and a slowdown in the China economy have all been factored into the forecasts. None of these -- and not even terrorist attacks, in fact -- were anticipated "to derail domestic growth prospects".
The forecasters were also relatively optimistic for next year. The median forecast for 2005 was 5.0 percent. This was higher than the forecast of 4.5 percent in the previous survey.
Some economists think a slowdown is inevitable. Much of this year's growth has been powered by monetary and fiscal stimulus in the US, that is, low interest rates and tax cuts. With interest rates expected to head higher from here onward, the huge levels of debt held by households and businesses in the US will become serious headwinds for further economic growth.
On the other hand, many economists are hoping that if jobs can continue to be created in the US at the pace of the past few months, the purchasing power of American consumers can be maintained and the economic expansion will become self-sustaining. As William G. Cheney, chief economist at MFC Global Investment Management said: "You create that many jobs and people go out and spend the money and it feeds on itself."
And some of that money will ultimately make its way to Singapore and feed its economic growth as well.
According to the latest survey of private-sector forecasters published by the Monetary Authority of Singapore (MAS) on 3 June, Singapore's gross domestic product will grow by 7 percent this year. This compares with a median forecast of 5.5 percent in the previous survey in March.
On 17 May, the Ministry of Trade and Industry had raised its forecast for Singapore's economic growth to between 5.5 and 7.5 percent, up from 3.5 to 5.5 percent earlier.
The PMI reported by the Singapore Institute of Purchasing & Materials Management (SIPMM) also indicates good growth ahead, with a reading of 55.7 for May, up half a point from the previous month. It was the twelfth consecutive month that the PMI has been above 50, the threshold for indicating an expansion in manufacturing.
And just for good measure, on Friday, the US Labor Department reported that the economy added 248,000 jobs in May. Job gains in April and March were revised upward to 346,000 and 353,000 respectively.
However, the jobs data is widely acknowledged as a lagging economic indicator. Among the leading indicators is growth in new orders. Here, the picture is less rosy.
Among the sub-indices reported by the SIPMM last month, the electronics new orders sub-index fell 4.4 points from the previous month to 55. The electronics new export orders contributed the bulk of the fall, down 6.2 points from the previous month to 54.4.
In the US, the Commerce Department also reported last week that new orders at US factories fell 1.7 percent in April.
The forecasters surveyed by the MAS also expected a slowdown. Their median forecast was for the Singapore economy to peak at 10.3 percent growth year-on-year in the second quarter, before falling to 6.1 and 4.6 percent in the third and fourth quarters respectively.
Further downside to economic growth this year, however, may be limited. According to the MAS report, higher oil prices, hikes in US interest rates and a slowdown in the China economy have all been factored into the forecasts. None of these -- and not even terrorist attacks, in fact -- were anticipated "to derail domestic growth prospects".
The forecasters were also relatively optimistic for next year. The median forecast for 2005 was 5.0 percent. This was higher than the forecast of 4.5 percent in the previous survey.
Some economists think a slowdown is inevitable. Much of this year's growth has been powered by monetary and fiscal stimulus in the US, that is, low interest rates and tax cuts. With interest rates expected to head higher from here onward, the huge levels of debt held by households and businesses in the US will become serious headwinds for further economic growth.
On the other hand, many economists are hoping that if jobs can continue to be created in the US at the pace of the past few months, the purchasing power of American consumers can be maintained and the economic expansion will become self-sustaining. As William G. Cheney, chief economist at MFC Global Investment Management said: "You create that many jobs and people go out and spend the money and it feeds on itself."
And some of that money will ultimately make its way to Singapore and feed its economic growth as well.
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