Singapore economy slowed down as GDP growth slipped to 3.9% in Q2

The construction sector’s growth fell to 4.6%.

The Singapore economy slowed down its growth to 3.9% in Q2 from the 4.5% growth in Q1 backed by a strong 10.2% YoY growth in the manufacturing sector, the Ministry of Trade and Industry (MTI) revealed.

On a quarter on-quarter seasonally-adjusted annualised basis, the economy expanded at a slower pace of 0.6% compared to the 2.2% growth in Q1.

The manufacturing sector’s growth is short of its 10.8% growth in the previous quarter. Other sectors also saw a growth in Q2 including finance and insurance (6.7%), information and communication (5.2%), accomodation and food (4%), business services (2.1%), wholesale and retail trade (1.5%), transportation and storage (1.3%), and other services industries (0.7%).

Meanwhile, the construction sector contracted by 4.6% in Q2, easing from the 5.2% decline in the Q1. Construction output was burdened primarily by public sector construction works. The sector shrank 15.4% QoQ, a reversal from the 0.8 per cent growth in the preceding quarter.

The wholesale and retail trade sector’s expansion by 1.5% YoY from the 2.5% growth in the previous quarter was fueled by both the wholesale trade and retail trade segments. The wholesale trade segment grew on the back of strong growth in the machinery, equipment & supplies sub-segment.

Meanwhile, retail sales volume grew by 0.4%, backed by both motor vehicular and non-motor vehicular sales. The wholesale and retail trade sector expanded 5.4% QoQ which is a rebound from its 12.9% contraction in the Q1

For transportation and storage sector, the 1.3% YoY growth is a slowdown from the 2.7% in Q1. It was pushed mainly by the air transport segment, which expanded on the back of an increase in air passengers handled at Changi Airport. However, the sector declined 2.7% QoQ, extending the 4.2% decline in Q1.

The accommodation & food services sector grew by 4% YoY, faster than the 2% growth in the previous quarter, mainly driven by accommodation and supported by higher gross lettings at gazetted hotels in line with an increase in visitor arrivals.

Meanwhile, the performance of the food services segment was lacklustre amidst the weak sales performance of restaurants and other eating places. The accommodation & food services sector grew 13.3% QoQ which is a reversal from the 4.7% contraction in the preceding quarter.
The information and communications sector’s expansion of 5.2% YoY is a cool down from the 5.4 % growth in Q2. The sector was buoyed by the IT & information services segment on the back of healthy demand for IT solutions. The sector grew 3%, quicker than the 2% growth in Q1.

For the finance and insurance sector, the 6.7% YoY growth is an extension to the 9.2% growth in the previous quarter. The sector’s growth in Q2 was fueled by expansions across all segments.

For the business services sector, the 2.1% recorded growth eased down from its 2.6% growth in Q1 amidst gains in the professional services and other segments, even as the contraction in the real estate segment eased. The sector shrank by 3.2% QoQ, which is a turnaround from the 11.4% growth in the previous quarter.

Amidst global tensions, MTI believes that the pace of expansion in the Singapore economy is expected to moderate in H2 2018, following the strong performance in the first half of the year.

“Growth will continue to be supported primarily by outward-oriented sectors,” the agency said. “In particular, the manufacturing sector is expected to continue to expand, supported in part by the electronics cluster, although growth will moderate from the high levels seen in the first half of the year.”

Meanwhile, MTI believes that that the growth momentum is likely to ease in tandem with the moderation in growth projected for key advanced and regional economies in the second half of the year for outward-oriented services sectors such as finance & insurance, wholesale trade, and transportation & storage.

For domestically-oriented services sectors like retail and food services, MTI thinks that the growth will likely to be backed by a pickup in consumer sentiments amidst improvements in the labour market.

“Sectors like information & communications and other services are also projected to remain resilient,” the agency explained. “However, the performance of the construction sector is likely to stay lacklustre for the rest of the year, given the earlier weakness in contracts awarded.”

The agency thinks that the 2018 GDP will be maintained by around 2.5% to 3.5% considering the global and domestic economic environment and Singapore’s H1 performance.