Manufacturing and wholesale sectors bear the brunt of collapsing commodity prices

They’ve been the culprit of nominal GDP’s snail pace growth.

It would be easy to overlook Singapore's nominal GDP as the city-state still has a positive real GDP growth. However, even with if its 2.2% real GDP growth in Q2 is respectable, its nominal growth have been the worst in the region.

According to a study by BNP Paribas, manufacturing and wholesale & retail trade (WRT) are the main drags of the weak nominal GDP, with nominal value-added in both sectors plummeting in Q2.

"Their importance to the wider economy is highlighted by GDP shares of 18% and 14%, respectively (and a combined share of 27% of jobs)," the report noted.

It noted that the orientation of the two are different, as Singapore manufacturers are largely focused on exports (SGD-sensitive), while WRT businesses are more geared into the domestic economy (interest rate sensitive).

"For both, aggregate price deflators are negative, making it logical to assume a link to the collapse in global commodity prices," BNP stated.

It pointed out that manufacturers were clear beneficiaries of the commodity price collapse, as input costs fell sharply, particularly in petrochemical and refining cluster.

This has been boosting manufacturing deflator by 15% in 2015, masking an estimated 6% decline in output volumes for the rest of the sector.

"With the boost from lower input costs fading, the reality of still weak global goods demand is now becoming more evident and profitability pressures are emerging," BNP said

Meanwhile, wholesalers have tried to preserve margins as WRT value-added declines.

"For wholesale trade, commodity prices have weighed down aggregate sales, but most firms have been successfully passed pressures down the value chain, preserving margins," the report argued.