Domestic woes: Singapore's private spending continues to weaken

Domestic demand fell 9.4%.

Sluggish domestic activity has been observed from recent data flow, revealing a softness in Singapore's overall economy.

A recent report by JP Morgan reveals that domestic demand contracted on a sequential basis in both of the past two quarters, and the high-frequency monthly data reports suggest continued weakness in early 3Q, particularly in private spending, even after a 0.8%q/q, saar decline in 2Q. The softness is striking against the backdrop of a persistently tight labor market and sustained wage growth that have buoyed incomes.

JP Morgan adds that negative wealth effects associated with slowing property price gains may be one factor exacerbating the recent sluggish trend in private consumption. After climbing steadily since the 2008-09 financial crisis, property prices and rental incomes have softened through the past several quarters. The potential impact on private sentiment and spending will need to be closely watched.

Aside from the recent real sector data flow, JP Morgan has observed a rapid decline in bank deposit growth across much of Emerging Asia—particularly in Singapore’s banking sector, where growth in resident-held fixed-term deposits has slowed to decade-lows. But whether this reflects the effects of an extended period of low rates, prompting depositors to seek yield elsewhere, remains unclear.