Singapore sees 2.2% growth in Q2 but cautious outlook prevails

The Singapore Exchange stopped trading on July 14, 2016 due to a technical glitch.
The Singapore Exchange stopped trading on July 14, 2016 due to a technical glitch.ST PHOTO: SEAH KWANG PENG

It has been slow going for Singapore's economy and the second quarter was not much better.

The economy grew 2.2 per cent from April to June, according to Ministry of Trade and Industry data out yesterday, in line with economists' expectations. The estimates reflect only April and May. The final data will be released next month.

But economists were unwilling to pop the champagne yet, citing broad weakness across various sectors of the economy.

Manufacturing, making up a fifth of the economy, was once again the biggest drag on growth. Factory output ticked up just 0.8 per cent.

While this was the sector's first positive year-on-year growth in at least five quarters, DBS economist Irvin Seah said momentum has slowed dramatically.

Other sectors fared only slightly better. Construction grew 2.7 per cent, down from 4.5 per cent, due to weaker private sector activity. The service industry rose 1.7 per cent, the same as in the previous quarter.

There were some bright spots, with first-quarter economic growth raised to 2.1 per cent from 1.8 per cent, owing to an upward revision in services output.

Mr Seah pointed out, however, that "this is still weak growth" and the outlook is not optimistic.

"It shouldn't come as a surprise, given the difficult economic conditions and challenging global environment," he added, citing China's slowing growth and Europe's uncertainty after the Brexit vote.

Citi economist Kit Wei Zheng said the data paints a "downbeat picture of broad-based economic stagnation" in the first half of the year.

Mr Allen Ang, group managing director of Aldon Technologies, expects sales to pick up in this half of the year.

"Generally speaking, it's still gloomy," said Mr Ang, whose firm refurbishes parts for flat panel and semiconductor producers.

But, he said, his customers have been receiving more orders since April and are ramping up production. "So more orders are flowing in to us now," he said.

A version of this article appeared in the print edition of The Straits Times on July 15, 2016, with the headline '2.2% growth in Q2 but cautious outlook prevails'. Print Edition | Subscribe