Singapore's economy at a glance

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Sources: Monetary Authority of Singapore, Trading Economics, Bloomberg

+++27 September: Re-specification of SiNGES shows sentiment already in decline as current conditions stabilise for now+++

Just as its British cousin, we have subjected the SiNGES to a re-specification so as to make it an even better prognostic tool. Both the expectations component – with regard to the relative influence of the Sing Dollar’s exchange rate as well as of composite and manufacturing PMIs, respectively – and the state component with regard to the relative weight of retail sales and industrial production have been refitted to the data. To better depict the marked changes in the open but small Singaporean economy with its emphasis on volatile trade, we have also increased the amplitude of the state component – And the results are remarkable. As it were, the expectations component now unequivocally shows that economic sentiment in the Lion City has begun to fall back from its former exuberance already, and much more so than the tentative turning point in the SiNGES’s August update had suggested. This clearly indicates that Singaporean businesses have become increasingly wary as to the impact of the escalating trade war, and in particular its repercussions for their dominant foreign market, China. The state component, meanwhile, has been rebounding from its long-running fall just at the zero threshold, allowing for a modicum of optimism that Singapore’s economy may be throttling, but not too hard as of yet. Industrial production, though, is increasingly disconcerting as it has all but collapsed over the course of the past three months, leaving its monthly growth rate in August at -2 per cent. And the recent development of the expectations component makes us project this state of affairs to stay.

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.