Singapore's economy at a glance

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Sources: Monetary Authority of Singapore, Trading Economics, Bloomberg

+++28 May: Sentiment drops below long-term trend a second time as current conditions draw nearer to negative values again+++

Followers of our SiNGES weren’t caught by surprise: When Singaporean GDP numbers for the first quarter came in just recently, the marked slowdown our leading indicator had been precluding over the past quarters showed up in the hard data, too. Though still growing, the Lion’s City economy has been weakening ever since the trade stand-off between China and the United States began to escalate. Don’t be misled by the seemingly strong quarterly growth of some 3.8 per cent on an annualised basis (the latter prone to often sizeable revisions): By the same measure, Singapore’s economy suffered a quarterly contraction by some 0.8 per cent for the first time in years in the fourth quarter of 2018; and year-on-year growth between January and March has decelerated to a downbeat 1.2 per cent, just as anticipated in the last issue of this update. A glance at our SiNGES makes clear why: For the second time in the recent past, the current trading conditions component of the indicator has come perilously close to negative territory. And just as worrisome, the expectations component has broken its long-term trend for the second time since mid-2018, too, thus aborting an attempted recovery during the second half of last year. Both the current state component and, aggregated with the shell-shocked expectations component, thus the main indicator have now firmly established a downward trend over the past two years. But why, then, don’t PMIs mirror this development also, you might ask? Well, that’s the advantage of our SiNGES: Its algorithm comprises many other leading indicators besides PMI data, thus systematically checking for discrepancies between those ‘soft’ sentiment indicators. This time around, it comes to the conclusion that current PMI figures somewhat embellish the situation when other leading indicators have already begun to deteriorate. Once PMIs will be turning downwards, too, we anticipate the expectations component of the SiNGES to join current trading conditions at negative values – thus creating the first occasion since late 2012 when both sub-indicators printed in negative territory. If that were to happen, Singapore would be facing its first recession in as many years.

Our SiNGES is an indicator of the condition of Singapore’s economy which, otherwise, does not exist in this comprehensive form. It has been constructed along the lines of our UKES (see home page) and consists of two components and the main index.

The component “expectations” runs ahead of the current situation, comprising elements such as development of inflation and interest rates, consumer- and business confidence, etc. The “state” component describes the current situation and comprises data such as industrial production, net trade, etc. The main index, then, is a smoothed combination of the two components.

The SiNGES describes the development of the Singaporean economy in the recent past rather precisely; particularly the expectations component has emerged as a valid tool for prognosis. It is calculated to scale so that a positive reading of the state component as well as the main index signals current economic expansion. Furthermore, the SiNGES generates these other signals:

When the expectations graph rises through that of the state component, that is a valid signal for an economic upturn in the near future (3-6 months) and vice versa for a break-down through the state graph. When the state component, additionally, plots over the main index, that signals a healthy and stable economic expansion; when it plots beneath the main index, the current economic upturn has not yet solidified.

Finally, on a design related note: We opted for green to match the dominant colour in the Garden City’s landscape.