Why bearish GDP growth estimates loom for 4Q12

The 1.1% expansion may just get more disappointing.

With revised data showing weaker growth in prior quarters, the economy expanded a better-than-expected 1.8% qoq SAAR in 4Q12. This means Singapore has averted a technical recession yet again. Yoy, 4Q12 GDP expanded 1.1% while 3Q12 GDP was cut to zero growth (+0.3% previously.) Full-year growth came in at 1.2% (4.9% in 2011).

But it appears like it’s not yet time to rejoice over economy ‘seemingly’ skirting technical recession with CIMB arguing that further revisions on more complete data could cut growth estimates for 4Q12 GDP.

Here’s from CIMB:

We maintain our 2013 growth forecast of 2.7%, expecting the MAS to maintain its policy of a modest and gradual appreciation of the trade-weight S$ in Apr, citing inflationary concerns.

Advance estimates from the Ministry of Trade and Industry (MTI) show no descent into a technical recession (two straight quarters of contraction).

Preliminary data show 4Q12 GDP expansion of +1.8% qoq annualised and seasonally adjusted (SAAR) vs. a revised -6.3% qoq SAAR for 3Q. Although the preliminary 4Q showing is better than expected (consensus and CIMB forecasts: +1.6% and -4.5% respectively), sharp cuts have been made to earlier data, allowing 4Q12 GDP to post sequential growth.

The first estimate of 3Q12 GDP in Oct 12 was -1.5% qoq SAAR (+1.3% yoy). This was revised to -5.9% qoq SAAR (+0.3% yoy) in Nov 12 and further to -6.3% qoq SAAR or 0% yoy today.

We believe further revisions on more complete data could be made, leading to lower growth estimates for 4Q12 GDP.
Yoy, 4Q12 GDP expanded 1.1%, below consensus forecast of +1.4% but above ours of 0%, bringing GDP growth to 1.2% in 2012 (4.9% in 2011), a tad ahead of our 1.1%. 9M12 GDP growth has been cut to 1.2% yoy from 1.4%.
 

The service sector rebounded, by +7.0% qoq SAAR in 4Q12 (-3.9% in 3Q12, revised from -3.5% previously), after contracting for two quarters, with the MTI citing “a rebound in the wholesale & retail trade, finance & insurance sectors, as well as other services industries.” Yoy, services expanded 1.5% vs. 3Q12’s 0.2% or 1.2% for the full year (4.4% in 2011).
 

On the other hand, manufacturing shrank further in 4Q12, by -10.8% qoq SAAR, on lower tech and pharmaceutical output. Yoy, growth eased to -1.5% in 4Q12 from 3Q12’s -1.6%. Full-year contraction was 0.2% vs. 2011’s +7.6%.
As GDP growth in 2013 could yet be weighed down by subdued global economic conditions, the government is maintaining its 1-3% growth assumption for the year.
 

And considering the inflationary bias inherent in its policy of restricting foreign-labour inflows, the MAS is expected to maintain its policy of a “modest and gradual appreciation of the S$NEER policy band” in its Apr 13 review (barring external shocks)