US consumer spending bodes well for Singapore

The sluggish recovery of the United States economy is not having a major effect on Singapore or the region, but economists and industry experts think there are pockets of growth there that can benefit Singapore companies.

The US economy performed below expectations in the second quarter, with expansion of just 1.2 per cent.

However, a rise in consumer spending and robust jobs data unveiled last week boosted expectations of stronger expansion and raised the possibility of an interest rate hike later this year.

DBS economist Irvin Seah said that Singapore would benefit from a firmer US recovery since the country is Singapore's third-largest market for non-oil domestic exports, accounting for 9.5 per cent of shipments.

But he added that China, which accounts for about 15 per cent of non-oil domestic exports, has a much bigger impact on Singapore.

"We're getting more drag from China... and not enough of a lift from the US. Our exports to China have stayed in the red and this has been the case since last year."

June marks the third consecutive month of 0.4 per cent growth in US consumer spending. Ms Choo of IE Singapore says the uptick bodes well for Singapore companies tapping into the strong US consumer base.  PHOTO: BLOOMBERG

OCBC economist Wellian Wiranto said in a research note that the US mainly impacts Asia via trade.

"The old saying that 'when America sneezes, the world catches a cold' still applies for Asia," he said, adding that US presidential candidate Donald Trump's anti-trade rhetoric posed a huge threat to Asian economies such as Singapore.

International Enterprise (IE) Singapore data showed that Singapore-US bilateral trade came in at $35.1 billion for the first half of this year, down a touch from the $37.1 billion recorded for the same period a year earlier.

However, Singapore's exports to the US lifted, coming in at $14.46 billion for the first half, compared with $14.35 billion last year.

Singapore companies can benefit from strong consumer spending in the US, said Ms Natalie Choo, group director for North America and Europe at IE Singapore.

"June marked the third consecutive month of 0.4 per cent growth in US consumer spending, slightly exceeding projections...

"This uptick bodes well for companies tapping into the strong US consumer base," she said in an e-mail. Several home-grown restaurant companies have set their sights on America, including VeganBurg, which set up shop in San Francisco last December, she said.

Singapore interest in the US tech sector continues to be high, she said, citing CapitaLand's launch of its venture capital arm C31 Ventures in June.

Ms Choo added that Singapore's direct investments in the US have been consistent over the past five years, averaging $15 billion a year.

Mr Vinnie Lauria, founding partner at Singapore-based venture capital firm Golden Gate Ventures, had thought that declines in initial public offerings in the US late last year would mean a negative impact on South-east Asia, but he noted: "I've seen just the opposite happen."

He added: "What we're seeing is an increase in foreign capital coming into the region, as they see the tech market in South-east Asia as being undervalued, compared with the US and China.

"I don't think investors are holding back in the US.

"They're shifting their capital to markets that show higher growth, such as South-east Asia. "

A version of this article appeared in the print edition of The Straits Times on August 13, 2016, with the headline 'US consumer spending bodes well for S'pore'. Print Edition | Subscribe