Singapore's robust headline indicators feared to be transitory

Headline prints are subject to higher concentration risks.

Standard Chartered Global Research put rosy headlines into question by constructing Broadness Indices (BIs) to measure the concentration of growth increase in or decline in industrial production (IP) and non-oil domestic exports (NODX).

The indices suggest that recent robust prints in headline indicators were less broad-based and may, consequently, be transitory and subject to higher concentration risk.

Singapore’s externally oriented industries saw robust growth in Q1-2017 and likely contributed positively to the final Q1-2017 GDP growth number. According to Standard Chartered, The Monetary Authority of Singapore (MAS) acknowledged this growth in its latest Macroeconomic Review released end-April. MAS expects growth in 2017 to be anchored by trade-related sectors, mainly driven by IT-related segments.

Moreover, uneven growth belies performance of externally oriented industries with the manufacturing sector being driven primarily by semiconductor demand.

IP increased 8.0% y/y in Q1-2017 versus -0.4% in Q1-2016, suggesting a significant recovery if only the superficial headline print is considered. However, the pick-up in activity is uneven within the industry clusters. Electronics remain as the main IP driver as precision engineering output rose bolstered by demand for electronics manufacturing.

Consequently, China remains as the primary source of demand for NODX. NODX to China and Hong Kong (which account for c.25% of Singapore’s NODX) rose 35.2% y/y in USD terms, while exports to Taiwan and Korea rose 35.4% and 51.1%, respectively. NODX to ASEAN remained modest, while exports to the EU, the US and the rest of the world remained weak.