Economists expect lower Q3 growth; uncertainties in US remain a worry

Local economists have delivered a progress report on the economy and their prognosis is that it is a mixed bag, with some good news interlaced with doubts as well, mainly due to uncertainties in the United States.

Their views come ahead of advance estimates on third-quarter GDP growth from the Ministry of Trade and Industry next Monday, the same day the Monetary Authority of Singapore's policy statement is expected.

The consensus among economists is that expansion for the three months to Sept 30 will come in at 3.8 per cent year-on-year.

At first glance this matches second-quarter growth, which was also 3.8 per cent. But economists expect a pullback in quarter-on-quarter terms, saying the strong 15.5 per cent rise in the second quarter was not sustainable.

Taking the second and third quarters as a whole paints a picture of an economy on a more stable footing, said Barclays economist Joey Chew, who expects 3.8 per cent growth in the third quarter in year-on-year terms.

OCBC economist Selena Ling agreed, noting that indicators from economies around the world are improving, with Europe gradually emerging from recession and Japan getting some lift from "Abenomics".

"The recovery story is still uneven but there is some light at the end of the tunnel."

While growth in Singapore's manufacturing sector remains sluggish, it has been picking up slowly over the year, added Ms Ling, who expects a 2.3 per cent expansion in third-quarter GDP over the same period last year.

"We are hopeful that manufacturing will continue to pick up steam despite the recent disappointing numbers."

The services sector continued to prop up economic growth in the third quarter, said UOB economist Francis Tan, who expects the sector to grow 4.8 per cent over last year.

However, the ongoing US government shutdown and uncertainties over the country's looming debt ceiling might throw a spanner in the gradual pick-up in this quarter, warned CIMB economist Song Seng Wun.

"The issues in Washington will have an impact on business and consumer confidence."

The indicators suggest a rebound in the fourth quarter for both the manufacturing and services sectors - and that assumption could now be at risk, added Mr Song.

"We could see a technical recession in the fourth quarter if the external environment takes a turn for the worse."

chiaym@sph.com.sg