Singapore's GDP pegged to hit 4.3-4.5% in 3Q

Boosted by stronger manufacturing sector.

According to CIMB, the latest Jul-Aug13 manufacturing production index of +3.3% yoy is encouraging and is supportive of a firmer yoy 3Q13 GDP growth. 

CIMB noted that the government will release the preliminary 3Q13 GDP no later than 14 Oct 2013. Assuming another month of modest Sep MPI growth (3-5% yoy growth is possible because of the low base as Sep 12 MPI declined 3.6% yoy) and assuming the service sector grows at a similar clip as in 3Q13 (5-5.5% yoy), the advance 3Q13 GDP is likely to come in at 4.3-4.5% yoy.

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This will lift the Jan-Sep 13 GP growth to about 3%, right in the middle of the government’s 2013 growth target of 2.5-3.5%.

Although the economic growth is likely to expand by more than 4% yoy in 3Q13, a sequential decline of about 2% qoq annualised (SAAR) is likely after the nearly 16% qoq SAAR rebound in 2Q13 (1Q13: +1.7%).

The sequential slippage in 3Q13 is due mainly to a 5-6% qoq fall in the goods sector growth. Given the choppy growth profile and the still-uncertain outlook for the coming six months, the MAS is probably going to maintain its present S$NEER policy when it releases its Oct monetary policy statement.

A loosening bias is unlikely considering the inflationary bias inherent in the government’s policy to maintain a tight grip on the supply of foreign labour force in an environment of full resident employment.