Singapore economy grew 5.5% in 4Q13

Thanks to a surge in industrial production.

According to DBS, the economy expanded by 5.5% YoY in the fourth quarter, exactly in line with its above consensus forecast (Consensus: 5.2%).

Here's more:

In sequential terms, the economy surged by 6.1% QoQ saar. Overall, the economy grew by 4.1% in 2013. A surge in the industrial production in December is the main reason for this upward revision. This brought manufacturing growth to 7.0% YoY, up from the 3.5% projected in the advance estimates.

That’s a doubling of the manufactur- ing growth number, which henceforth led to the drastic revision in the headline GDP growth figures. The outperformance was mainly driven by simultaneous spikes in output from the biomedical and electronics clusters.

Growth in the construction sectors eased to 4.8% YoY, 6.6% previously. Margin compression due to high labour costs probably has affected performance in this sector despite a healthy pipeline of projects. Key services sector also put up a healthy showing although growth has moder- ated slightly. It recorded growth of 5.9% YoY in the quarter, as compared to 6.3% in 3Q13.

Wage pressure is probably the reason behind the moderation in growth. Nevertheless, improvement in regional growth outlook has continued to support expansion in the trade related, tourism and financial services sectors.

Going forward, we remain optimistic about the outlook on the global economy. While we are not as bullish on the US as the market, the economy is expected to remain on a slow, albeit steady recovery path.

Moreover, the fear and risks of QE tapering was somewhat exaggerated. Ultimately, QE tapering is NOT monetary policy contraction. In fact, US monetary policy is still expansionary in nature, just less so than what it used to be.

Market expectation as well as the global economy will adjust gradually to a new paradigm of higher interest rates as long as clarity remains on the direction of global monetary policies. Eurozone is no longer a drag on the global economy.

Although growth will re- main sluggish against the backdrop of structural impediments, the fact that it is no longer a minus to the global economy is by itself a plus. Asia will outperform in 2014, led by more sustainable growth in China.

The Chi- nese economy is projected to grow by 7.8% for the year. Slow by its historical benchmark but still fast by global standard. While there are risks in its banking system and domestic structural reforms, chance of a major blow-up remains low.