Singapore economy to post weak growth of 0.5% in 1Q15

Too close to a contraction.

The manufacturing sector remains a drag in Singapore’s otherwise steady economy, with four consecutive months of below 50 PMI readings.

According to DBS,the economy is expected to narrowly avert a contraction in 1Q15. Expectation is that the economy will likely expand marginally by 0.5% QoQ saar. That’s weak growth by Singapore’s standard and way slower than a 4.9% expansion in 4Q14. On a year-on-year basis, headline growth will likely report 1.8% YoY, down from 2.1% in the previous quarter.

With an equally dismal industrial production output growth of -1.2% YoY on average between Jan-Feb, outlook for this sector looks bleak. A contraction in manufacturing growth is almost a given.

Here’s more from DBS:

Services sector will be the main pillar of growth but specific industry showings will be mixed. Performance of some externally oriented services industries underpinned by the manufacturing cluster will not look good. This is particularly the case with industries such as wholesale trade and transportation services.

However, financial services will remain the outlier, with double digit growth powered essentially by healthy trading volume. Overall, amid the still sluggish global demand and existing domestic labour crunch, services sector growth will remain more or less unchanged from the previous quarter, at about 3% YoY.

Nonetheless, this is afterall the advance estimates, which is prone to massive revision. Risk is that this upcoming set of advance numbers may undershoot. So, while a “worse than expected” outcome for 1Q15 GDP figures will imply downside risk to our full year GDP growth forecast of 3.2%, any recalibration will be conditioned on the finalised figures, which will only be due in May.