But the higher base from which next year’s growth will be measured, as well as external uncertainties, have led them to lower projections for 2011.

A Monetary Authority of Singapore survey of 20 professional forecasters last month found that forecasts now point to a most likely outcome of 15-15.9 per cent growth.

This significant jump, from a probable outcome of under 11 per cent growth in June’s edition of the survey, was thanks to the 18.8 per cent surge in Q2 GDP that outstripped expectations for 9.4 per cent growth.

The latest median forecast of 14.9 per cent growth for the year, gleaned from a range of 11-16.5 per cent, was also a sharp hike from June’s 9.4 per cent.

Manufacturing is still expected to be the economy’s key driver this year with a median growth forecast of 28.7 per cent, up from 16.7 per cent three months ago.

And analysts are also expecting non-oil domestic exports to grow 19.5 per cent, above the official forecast of between 17 and 19 per cent.

Compared to the last survey’s findings, financial services, wholesale & retail trade, hotels & restaurants, and private consumption are now forecast to grow more strongly this year. Only for construction did the analysts’ median growth forecast fall slightly.

The economists polled now expect consumer price inflation of 2.9 per cent this year, up from 2.8 per cent three months back. Unemployment forecasts for the year also showed an uptick from 2 per cent in the last survey, to 2.2 per cent.

In the immediate months ahead, economists are expecting 11.6 per cent growth in Q3, up from 6 per cent in the last survey. The focus is on manufacturing, whose 44.5 per cent surge fuelled Q2 GDP growth but is now expected to slow to 15.9 per cent growth in Q3.

Already, Singapore’s industrial production grew at its slowest pace in eight months in July. The regional production picture is not too optimistic either, with declines in the recent purchasing manager indexes (PMI) coming out of Taiwan and South Korea.

Also of growing concern are sharper and earlier than expected signs of a slowdown in the US, where sluggish economic growth and high unemployment continue to weigh on consumer spending.

Standard Chartered economist Alvin Liew said that his forecasts, the most bearish of the lot, reflect lingering concern over external risks which Singapore’s trade-dependent economy would be especially sensitive to.

He expects Q3 GDP year-on-year growth of 5.8 per cent (an annualised q-o-q contraction of 29.9 per cent), some way below the median forecast of 11.6 per cent.

But so far, the slowdown in manufacturing has been within expectations, said OCBC economist Selena Ling. And others such as RBS economist Lim Su Sian think that Q3 could even surprise on the upside if the expected pharma pullback is not as sharp and the services sector contributes stronger growth.

Noting that yesterday’s rebound in China’s PMI ‘offers reassurance that China’s growth, critical for Asia and the world, continues’, Action Economics director David Cohen also expressed optimism that Singapore would continue on a positive trajectory and might do better than the 15.5 per cent he projects for 2010.

But looking a little further into the future, next year’s first half being measured off this year’s high base and residual risks of a global double-dip have led forecasters to nudge their 2011 forecasts downwards.

The survey showed that economists now expect 2011 growth to be between 4 and 4.9 per cent, down from 5 and 5.9 per cent last year.

Citi economist Kit Wei Zheng stressed, however, that external dampeners must be set against domestic factors supporting the growth story.

‘Sizeable investments locked-in and approved before the recession are set to come onstream in the next one or two years, financial sector activities are being relocated to Singapore and the IRs are not running at full capacity yet,’ he said.

Provided that there is no ‘full-blown global recession’, these new engines ought to sustain growth in the coming year, he added

Source: Business Times, 4 Sep 2010

SINGAPORE’S rebounding economy may burst through the 15 per cent growth ceiling projected by the Government earlier this year.

According to 20 economists and analysts surveyed by the Monetary Authority of Singapore (MAS), the economy is most likely set to expand by between

14.9 per cent and 15.9 per cent this year, rather than the 13 per cent to 15 per cent range expected by the Government.

Their median growth forecast of 14.9 per cent – announced in the latest MAS survey of professional forecasters released yesterday – is a significant leap from the median forecast of 9 per cent contained in the previous survey in June.

And, if achieved, it will enter the record books as Singapore’s highest-ever annual growth rate.

The last record was set in 1970, when the economy advanced 13.8 per cent.

Alongside headline growth, the economists have also hiked their forecasts for this year’s exports, inflation and the unemployment rate.

But this year’s bigger output jump could spell slower growth next year, because 2011′s performance will be measured against this year’s higher base. The forecasters are now anticipating 4 per cent to 4.9 per cent expansion for next year, down from their earlier forecast of 5 per cent to 5.9 per cent.

The upgraded projection for this year was driven mainly by the manufacturing sector, which is now thought to have performed better for the full year.

Expectations have also been raised for the financial services and wholesale and retail trade industries.

This should see the economy logging double-digit expansions in the third and fourth quarters, said the economists polled.

They are predicting 11.6 per cent growth for the third quarter, up from a previous forecast of 6 per cent, although it is down on the 18.8 per cent increase in the second quarter.

In the fourth quarter, growth may accelerate to 12.6 per cent, the survey showed.

Most economists believe the economy peaked in the second quarter and will slow as the global economic recovery wavers in the second half of the year.

Mr David Cohen of Action Economics forecasts 15.5 per cent growth this year, even after taking into account a quarter-on-quarter contraction in the third quarter and slight growth in the fourth quarter.

‘I think the sense is that the second quarter got a little ahead of itself, and may have been exaggerated by some special factors in biomedical manufacturing,’ he said.

‘The production schedules tend to bounce around and maybe were a little overstated in the second quarter.’

On top of that, Mr Cohen said ‘there is a sense that the global economy is slipping from the pace of rebound that has been seen this year’.

While the Asian economies generally continued roaring in the second quarter, growth in both Japan and the United States slowed sharply.

‘People are nervous, certainly, that the US can slip into a double-dip. But I think the most likely scenario is for continued positive growth in the US and, as long as they can avoid a double-dip, here in Asia, the continued momentum should support a positive trajectory,’ said Mr Cohen.

A technical recession in the second half is even possible, said JP Morgan economist Matt Hildebrandt, who forecasts 14.8 per cent growth this year.

Morgan Stanley economists, who expect 16 per cent growth this year, have warned that leading indicators such as the US ISM new orders index imply a slowdown in export growth in the coming months.

But ‘the strong first half means that a lot of growth is already in the bag, and that a double-digit (growth) headline for 2010 is likely even in a double-dip scenario’, they said in a recent report.

The MAS survey reported yesterday that the Singapore dollar is projected to rise to $1.363 against the US dollar at the end of this month and to $1.35 by year-end.

Source: Straits Times, 2 Sep 2010

INFLATION in Singapore rose last month as higher costs of cars, homes and food pushed up consumer prices.

The consumer price index here for last month climbed 3.1 per cent year on year, in line with the expectations of economists, who had anticipated that inflation would begin to increase in the second half of this year.

Transport costs were the biggest contributor to the rise – last month, they spiked by 10.7 per cent year on year, due to more expensive cars and petrol, said the Department of Statistics (DOS) in a release yesterday.

The cost of housing also went up 2.7 per cent, boosted by an increase in electricity tariffs and accommodation costs. Food prices rose 1.5 per cent from a year earlier, on the back of dearer prepared meals, vegetables, fresh seafood, meat, poultry, rice and other cereals.

Economists have flagged food inflation as a source of concern, with the prices of basic crops such as wheat, coffee, sugar and corn shooting through the roof recently due to bad weather and droughts. Wheat prices, in particular, have soared 50 per cent since June.

However, economists agree for now that the jump in food prices should not have a lasting impact on inflation, as it is the result of temporary disruptions in supply caused by weather conditions.

A report released yesterday by Credit Suisse carried further reassurance. It said that while food items account for a large proportion of inflation in countries such as Singapore, the run-up in wheat prices is not yet large enough to become a significant driver of inflation.

On a month-on-month basis, Singapore’s consumer price index rose 1.3 per cent last month compared with June, primarily owing to more expensive housing and transport. Housing costs rose not just because of higher accommodation costs and electricity tariffs, but also because rebates for service and conservancy charges were given out in June but not in the last month.

The prices of clothing and footwear were also 3.2 per cent higher last month following the Great Singapore Sale period in June, said DOS.

In the first seven months of this year, consumer prices in Singapore have risen some 2.1 per cent compared with the same period a year earlier. Taking out accommodation costs, the increase would have been 2.9 per cent.

Many economists, including Barclays’ Mr Leong Wai Ho, now believe that the Monetary Authority of Singapore (MAS) will stay put with its current policy of a gradual appreciation of the Singapore dollar when the next policy decision is made in October. Inflation for the year is not expected to exceed the Government’s estimate of between 2.5 per cent and 3.5 per cent.

‘While we expect inflation to continue its upward trajectory, hitting 4 per cent by year end, this would likely remain well within the MAS’ range of expectations, with full year inflation likely to average slightly lower than 3 per cent,’ said Citigroup economist Kit Wei Zheng.

——————————————————————-
Change in prices: July 2010 over July 2009

Transport: 10.7%

Education & stationery: 2.9%

Housing: 2.7%

Health care: 2.3%

Recreation and others: 1.7%

Food: 1.5%

Clothing and footwear: -0.3%

Communication: -2.8%

Overall: 3.1%

Source: Straits Times, 24 Aug 2010

THE economic recovery is roaring along at record pace but cash registers across the island have not been ringing as wildly as expected and economists are struggling to figure out why.

It may be reluctance on the part of still-nervy consumers to splash out after the recession, flat wages growth, or just that the realities on the ground have yet to catch up with the growth statistics.

The headline number has been the seasonally adjusted retail sales index, which has shown month-on-month contraction since February. The June retail figures were 0.7 per cent lower than May, according to the Department of Statistics.

Excluding motor vehicles – their sales are down after the Government released fewer certificates of entitlement – the index was mostly flat with an average 0.6 per cent month-on-month growth in the first half of the year.

The mediocre figures seem out of kilter with the Government’s forecast of full-year economic growth of between 13 and 15 per cent.

Looking at year-on-year figures – again excluding motor vehicles – and the retail sales index has recorded positive growth throughout the first six months, partly due to the low base last year when the economic crisis hit.

Experts say that retail sales might have failed to keep up with the strong economic expansion figures because wage growth is lagging, with pay packets yet to catch the rebound fever.

DBS economist Irvin Seah said it might take some time for strong growth to filter down to consumers. He added that it was well-recognised that the labour market – and hence wage levels – often lagged up to two quarters behind gross domestic product growth.

But the labour market had picked up more quickly this time around compared with the last downturn, thanks in part to various government schemes to save jobs.

‘However, while we have seen wages rise in more specific segments such as finance, the growth in wages has not been broad-based as yet,’ he said.

OCBC economist Selena Ling said retail sales usually moved in tandem with the positive sentiment that economic growth created, and any lag would be slight. She described the retail situation as ‘strange’ and said it could be due to more global shoppers. With budget airlines making travelling abroad affordable, buying patterns may have shifted abroad.

Citigroup economist Kit Wei Zheng said economic growth might have been exaggerated by the biomedical sector. This grew at a blistering 70 per cent in the first half compared with the same period last year due to the production of higher-value-added drugs.

And this growth does not generally translate into more jobs. ‘The sector is more capital rather than labour intensive… this may not translate to the same extent to swings in actual economic welfare on the ground.’

With strong home sales, a substitution effect might have also occurred where spending on a big-ticket item offset spending in other areas, Mr Kit added.

Other data painted a different picture. CIMB economist Song Seng Wun cited MasterCard’s report of a 28 per cent increase in spending during the Great Singapore Sale compared with last year. He said the retail sales index could be tracking spending in a different way since it was unclear how the data was collected.

Based on the retail sales index, it has been a mixed bag for the retail sector this year. Sales of telecommunications apparatus and computers, apparel and footwear and food and beverages were among the worst performers, while watches and jewellery performed better, likely due to strong tourism numbers.

Watch retailer The Hour Glass said in its first quarter financial statement that while sentiment has improved over the last year, consumers remain cautious due to the uncertainty of the global recovery.

Isetan (Singapore) also said in its second quarter results that the strong economic recovery had not resulted in a similar trend in consumer spending at its stores. ‘Following this recovery, it will take time for consumer confidence and spending to return. Until then, competition for the consumer dollar will remain keen and retailers will have to monitor their costs closely,’ it said.

Singapore Retailers Association president Jannie Tay said that sales this month are gradually picking up and are expected to hold steady. Consumers remain concerned over the economic recovery in the United States and are not over-excited about spending, she said, adding: ‘We expect to at least maintain last year’s sales, but costs have gone up so our bottom line might become slimmer.’

Source: Straits Times, 21 Aug 2010

Some of the heat came out of the red-hot economy at the tail-end of the second quarter, with indications now that growth for the rest of the year will be around 12 per cent.

That is a number many countries would envy but it represents a slowdown from the record 17.9 per cent expansion in the first six months of the year.

‘It does confirm our long-held view that the Singapore economy is due for a slower second half this year. Still, we see this moderation in growth as a healthy normalisation of economic activities,’ said DBS economist Irvin Seah.

A cut in factory output in June, especially in drugs output, was behind the slower-than-expected growth of 18.8 per cent in the April to June period from a year ago, according to Ministry of Trade and Industry (MTI) figures yesterday.

This was a few notches below the 19.3 per cent forecast by both the Government and private-sector economists, but still higher than the 16.9 per cent notched up in the first quarter.

Nonetheless, the Government is sticking to its forecast that full-year growth will come in at between 13 and 15 per cent. This means expansion will likely not surpass 12 per cent for the rest of the year, said MTI permanent secretary Ravi Menon at a media briefing yesterday.

In fact, as growth cools off from quarter to quarter for the rest of the year, there is a statistical possibility of a technical recession, he said.

A technical recession, defined as two consecutive quarters of negative quarter-on-quarter growth, could happen, he explained, if the volatile output in the drugs sector falls while the rest of the economy stays flat in the second half.

Biomedical output will slow from its blistering 70 per cent first-half pace, with plants shutting for scheduled maintenance and those in production changing to lower value ingredients, he said.

Quarter-on-quarter growth in the April to June period has already slowed to 24 per cent from 45.7 per cent in the first three months of the year.

Mr Menon added: ‘I should emphasise that it is technical… a statistical outcome of what happened in the first half. The underlying trend in the economy is for flat growth and the recovery maturing at a more sustainable rate.’

Citigroup economist Kit Wei Zheng said the economy could contract by between 9 and 10 per cent this quarter on a quarter-on-quarter basis and have zero growth in the three months after that.

Still, the manufacturing sector grew a spectacular 44.5 per cent in the second quarter, leading a broad-based recovery boosted by drugs manufacturing, electronics and tourism, Mr Menon said.

Non-oil exports grew 28 per cent in the second quarter as shipments to all of the top 10 markets grew, with the biggest increases to China, Europe and Hong Kong, said International Enterprise (IE) Singapore.

The integrated resorts lifted tourism, as well as the services sector, which grew 11.2 per cent in the second quarter, following 11.4 per cent growth in the first.

‘Singapore has never experienced such a synchronous rebound in all key sectors of the economy, compared to previous recoveries,’ Mr Menon said.

The 17.9 per cent growth in the first half is a record, and what Mr Menon called ‘the strongest economic recovery Singapore has ever seen’.

Yet it was not the fastest as it took eight quarters for output to recover to pre-recession levels compared with six or seven in past recoveries.

Looking ahead, Mr Menon reckoned a double-dip recession is unlikely in the US, though unemployment remains high.Risks to growth in Europe from the debt crisis appeared to have eased. But growth in China is easing from fewer infrastructure investments, affecting traders of minerals and raw materials here.

Source: Straits Times, 11 Aug 2010

(SINGAPORE) The Republic’s exports growth accelerated in the second quarter, thanks to stronger global trade flows, but a more subdued phase is on the cards.

Non-oil domestic exports (NODX) rose 28 per cent in Q2 from a year ago, up from the 23 per cent growth posted in Q1, trade agency International Enterprise (IE) Singapore said yesterday.

And total trade rose 28 per cent year-on-year in Q2, faster than the 27 per cent growth seen in the first quarter, said IE Singapore’s quarterly trade review, released in conjunction with the Ministry of Trade and Industry’s (MTI) quarterly GDP report.

While total trade was due to strong growth in world trade and higher oil prices than a year ago, the closely watched NODX also grew.

A sustained upswing in the global electronics cycle lifted exports of electronic NODX such as integrated circuits, IC parts and PC parts, while growth in non-electronic NODX was led by domestic exports of petrochemicals, specialised machinery and ships.

The only category of NODX which fell in Q2 was pharmaceuticals, whose 11.4 per cent decline was greater than the 5 per cent dip registered in Q1.

On a seasonally-adjusted basis, NODX rose 9 per cent in Q2 from the quarter before, following Q1′s 8.3 per cent growth from Q4 last year.

Things look more subdued for the rest of this year. ‘The weakening of the euro against the currencies of key trading partners and sluggish domestic demand in the US and the EU27 is expected to dampen world trade in the second half,’ said IE Singapore. Its forecasts for both NODX and trade growth this year still stand at 17- 19 per cent, after upward revisions of both last month.

Recovery in the external economy also boosted Singapore’s GDP in Q2 via tourism dollars. Visitor arrivals hit record highs in recent months, driven by greater consumer optimism abroad and drawn by the newly- opened integrated resorts. This boosted tourism’s contribution of an estimated 5-8 per cent to GDP, cutting across various sectors.

MTI Permanent Secretary Ravi Menon said at a briefing yesterday that the gaming industry is not listed separately for now as its contribution remains small and confidentiality issues are at stake, with only two players in it.But the IRs have begun contributing to GDP with output captured under ‘other services industries’, he said. This saw growth pick up from 7.5 per cent in Q1 this year and 5.4 per cent in Q4 last year to 12.9 per cent in Q2.

Source: Business Times, 11 Aug 2010

(SINGAPORE) The Republic’s economy grew by a record 18.8 per cent in the second quarter from a year earlier, slower than the 19.3 per cent estimated last month, though still the fastest year-on-year expansion ever for the country.

But yesterday’s downward revision from the July advance estimate also indicates a slowdown in economic activity that government officials, including Prime Minister Lee Hsien Loong, have warned of in recent weeks.

That slowdown could even lead to a so-called technical recession in the second half of the year if economic output shrinks compared to the preceding quarter for two straight quarters. The strong showing in the first half has made that more likely, though such an outcome would simply indicate a return to output levels that the country can sustain over the longer term.

‘Generally, the moderation appears to have set in a little earlier than expected,’ said Selena Ling, an economist at OCBC Bank. ‘It does look like Q3 will see a sharp slowdown.’

Growth in both manufacturing and services was lower than the advance estimates based largely on data in April and May – a sign that the economy cooled in June.

But the year-on-year economic growth in Q2 was still higher than the 16.9 per cent growth in Q1, and the fastest on record for Singapore. The economy is still expected to grow by 13-15 per cent for the whole of 2010, due mainly to the ‘exceptional’ growth in the first half of the year, Ravi Menon, permanent secretary at the Ministry of Trade and Industry (MTI), told reporters yesterday.

However, year-on-year growth in the second half will ‘at best be 12 per cent’ as biomedical manufacturing plants shut down for scheduled maintenance and a weak recovery in the United States and Europe drag down growth worldwide, Mr Menon added. But a double-dip recession for Singapore is unlikely.

Manpower Minister Gan Kim Yong yesterday urged companies to consider raising the variable component of their staff wages, to give firms more flexibility to cut wage costs rather than jobs in a downturn, Channel NewsAsia reported.

Compared to the first quarter, gross domestic product (GDP) for the three months to end-June grew at an annualised pace of 24 per cent, after adjusting for seasonal variations in economic output, down from the 45.7 per cent quarter-on-quarter growth in Q1. That’s lower than the advance estimate of 26 per cent seasonally adjusted, annualised growth in Q2 GDP compared to Q1.

‘The downward revision, while not material, suggests that momentum moderated in June,’ Citigroup economist Kit Wei Zheng said in a note to clients.

That annualised rate measures how much Singapore’s GDP – the total dollar value of goods and services produced in Singapore – would expand in a year if it continued growing at the same pace compared to the previous quarter, for four straight quarters.

For the first six months of the year, the economy expanded by 17.9 per cent compared to a year ago.

At current market prices, Singapore’s economic output in the second quarter was worth some $74.9 billion. After adjusting for inflation, Q2 GDP was 14.5 per cent higher than the output level reached in the third quarter of 2008, just before it declined in the recent recession – an indication of how strong the recovery has been.

But inflationary pressures are ‘not alarming’, Mr Menon said.

Monetary Authority of Singapore deputy managing director Ong Chong Tee said the central bank’s currency policy remains ‘appropriate’ given the expected slowdown in growth in the second half of the year.

The services-producing industries, which contribute about three-fifths of Singapore’s GDP, grew 11.2 per cent year on year in Q2, led by a rapid expansion in wholesale and retail trade. Financial services grew by 10.2 per cent, due to increased foreign-exchange trading activities and domestic bank lending, MTI said.

The manufacturing sector, which contributes about a quarter of Singapore’s GDP, expanded 44.5 per cent in Q2 compared to a year earlier, led by growth in biomedical manufacturing and electronics output. The construction sector, the next biggest goods-producing industry, grew 11.5 per cent, helped by an increase in public-sector construction activities, MTI said.

Source: Business Times, 11 Aug 2010

SINGAPORE needs to look beyond the current rebound and focus on growing its economy with sustained effort from all, Prime Minister Lee Hsien Loong said in his National Day Message last night.

He revealed that Singapore’s first-half growth came in at 17.9 per cent from a year ago, a tad shy of July’s advance estimate for an 18.1 per cent growth, but still an exceptional pace.

This means that the economy’s performance in Q2, which the Ministry of Trade and Industry will elaborate on tomorrow, is likely to fall below the initial 19.3 per cent growth forecast too.

While growth is set to moderate in the second half due to sluggish demand and a slowdown in the global recovery, that should have little impact on the official forecast of between 13 and 15 per cent growth in gross domestic product for the full year, a range that Mr Lee reiterated yesterday.

Of the 183 economies for which the International Monetary Fund has GDP forecasts, Qatar is the only one with a forecast higher than Singapore’s official forecast for 2010.

‘But let us not get carried away,’ Mr Lee said, urging vigilance of risks that remain in the world economy as these could easily buffet the shores of small and open Singapore.

It is unrealistic to expect growth as spectacular to be repeated year after year. The goal rather, is to attain continued growth that bears fruit all Singaporeans can enjoy – better homes, schools, hospitals, public transport and recreation, he said.

Speaking from the Pinnacle@Duxton, the prime minister added that ensuring all can partake of growth’s benefits will require Singapore to ‘invest in our people, upgrade our infrastructure and improve our productivity’, and ‘take full advantage of opportunities in a booming Asia’.

With human capital a key resource for Singapore, two main issues Mr Lee addressed in his message are investments in education and training, as well as the need to ‘reinforce the Singapore team with talent and numbers from abroad’.

Acknowledging Singaporeans’ concerns over the rising numbers of foreign entrants, Mr Lee sought to assure that the government would ‘control the inflow, to ensure that it is not too fast, and not too large’.

Levies on foreign workers have been raised to reduce companies’ reliance on cheap imported labour as part of Singapore’s current productivity drive. Still, Mr Lee said in July that Singapore needs 100,000 more foreign workers this year to ease its labour market crunch.

He urged Singaporeans to welcome foreign workers, new PRs and new citizens ‘with an open heart’ and help them integrate and ‘strike roots’ in Singapore. Without deepening its talent pool and addressing the shortage of workers, this ‘shining red dot will grow dimmer’, Mr Lee said.

But citizens still come first, and the government is investing $5.5 billion over five years to build two Continuing Education and Training campuses in the east and west of Singapore, as well as schemes and incentives to help companies and workers raise productivity, he said.

This will build on Singapore’s education system, in which the government intends to ‘create new peaks of excellence in ITEs, polytechnics and universities’, Mr Lee said.

Source: Business Times, 9 Aug 2010

(SINGAPORE) Business activity and optimism has cooled, alongside expectations of slower economic growth in the second half of this year.

Even so, leading indicators from the latest BT-UniSIM Business Climate Survey predict that Singapore’s gross domestic product may rise by up to 14.3 per cent in Q3, from a year ago.

All the survey’s indicators of actual business activity – sales, profits, orders – declined in the second quarter, following Q1′s strong showing. Optimism about business prospects in the second semester also receded among the 132 firms polled in July.

These indicators, which have shown close correlation to the subsequent quarter’s GDP growth over the survey’s 15-year history, now predict Q3 GDP growth of between 12.4 and 14.3 per cent.

Though this agrees with the slowed pace of growth most economy watchers already expect for the rest of 2010, survey director Chow Kit Boey notes that it still marks a third consecutive quarter of double-digit expansion for Singapore.

GDP jumped 16.9 per cent year-on-year in the first quarter and 19.3 per cent in the second, according to advance estimates. Actual Q2 figures will be announced by the Ministry of Trade and Industry (MTI) next Tuesday.

The survey’s leading indicators underestimated GDP growth in the last few quarters, largely because government expenditures and the integrated resorts (IRs) were not covered, Ms Chow says.

As business activity slows, optimism on the ground has tapered off too. The business prospects net balance (the difference between the proportion of optimistic firms and pessimistic ones) was 42 per cent, 11 points down from the previous survey.

Sentiment remains positive, though – the decline was due to more firms expecting no change or fewer expecting brighter prospects, rather than any increase in the proportion of firms expecting things to worsen.

The slowdown in business activity – sales, profits and orders – shown in the survey’s findings signals volatility in the business environment, Ms Chow says.

In the last two expansion phases which began in 1999 and 2003, deceleration set in only after four quarters of increase. This time around, the expansion in sales began in Q1 this year, but dampened in the very next quarter.

‘This reflects high volatility owing to rapid transmission of external shocks and greater interdependence of economies. Business cycles have thus become shorter,’ Ms Chow said.

The overall sales net balance (the proportion of firms reporting a gain minus that reporting a fall), slipped 19 points to 9 per cent in Q2.

In terms of orders and new business, more firms reported lower orders and fewer reported gains, so the net balance tumbled 24 points to 19 per cent.

Weaker profit performance across the board also drove the profits net balance 18 points down to zero in the second quarter.

Large firms outperformed small ones (firms whose sales fall below $10 million if in manufacturing or $5 million otherwise) on all indicators except profits. And the gap between the two groups was widest for orders and new business, for which small firms actually saw an overall contraction. Foreign-owned companies did better than local ones on all counts, for a third quarter running. But their business outlook also dimmed the most, falling 22 points.

Keeping its ‘star performer’ status for a fourth straight quarter was the financial and business services sector, with the best performance in sales and profits. It narrowly beat the manufacturing sector, which had the best showing for orders and new business, and the commerce sector, which was the most optimistic.

Source: Business Times, 6 Aug 2010

THE Singapore economy continues to enjoy strong employment growth, adding 26,500 jobs in the second quarter.

The fuel for growth came overwhelmingly from the service sector, thanks to the two integrated resorts, new hotels and heartland shopping malls.

Although the pace of job creation has slowed from the first quarter, when 36,500 jobs were added, Manpower Minister Gan Kim Yong is upbeat about the outlook for the rest of the year.

‘Looking ahead, unemployment appears to have broadly stabilised and the labour market outlook for 2010 is optimistic, with robust employment growth expected,’ he wrote in a posting on his ministry’s newly set up blog.

The overall, seasonally adjusted unemployment rate was 2.3 per cent last month, up slightly from that in March but significantly lower than the rate of 3.2 per cent a year ago.

The resident unemployment rate – among Singaporeans and permanent residents – was 3.3 per cent last month, with an estimated 87,800 residents without jobs.

Redundancies also fell across the manufacturing, construction and service sectors, from a total of 2,400 in the first quarter to 1,900 in the second quarter.

Mr Gan described the fall as ‘reassuring’.

The slowdown in job creation in the second quarter as compared with the first quarter could be due more to ‘tight supply, rather than soft demand’, Citigroup economist Kit Wei Zheng said.

Hiring difficulties could stem from more picky job seekers and a slower inflow of foreign workers, as compared with previous years, he added.

In terms of job growth, the service sector created 27,400 jobs in the second quarter. Construction added some 1,800 jobs, while manufacturing actually lost 2,400 jobs.

Economists believe job losses in manufacturing should not be a big source of concern, given the recent strong output growth. The losses were more likely due to the ongoing restructuring of the economy, said National University of Singapore economist Shandre Thangavelu.

‘It will be very interesting to see third-quarter figures, whether employers will adjust slowly or immediately to the end of Jobs Credit,’ he added.

He was referring to the $4.5 billion government scheme to subsidise local worker payrolls and encourage employers not to lay off workers during the recession. The scheme ended last month.

Looking ahead, the war for talent is likely to heat up as employee turnover is increasing, said Ms Yvonne Cox, South-east Asia managing director of human resource consultancy Towers Watson.

‘The service sector, in particular the hospitality and retail industries, is experiencing spikes in employee turnovers as the integrated resorts have ramped up in the last six months,’ she said.

Service-sector firms are upbeat about business conditions in the second half of this year, according to a Department of Statistics survey on third-quarter business expectations released yesterday.

Among those hoping to grow their business is coffee-shop chain Ya Kun Kaya Toast, which plans to open five outlets in November. The tight labour market, however, presents problems.

Its operations manager Jimmy Ng said it faces difficulties hiring young Singaporeans and a cap on hiring foreigners.’It’s a good time to expand the business now but, without staff, we cannot open new outlets,’ he said.

Mr Gan addressed the issue in his ministry’s blog.

As productivity gains will take some time to materialise, employers ‘may need to bring in additional foreign workers this year, despite the higher levy which took effect this month’, he wrote.

But he also called on employers to step up efforts to raise productivity to meet the pace of growth, innovate and ‘reduce their dependence on foreign manpower’.

Source: Straits Times, 31 Jul 2010