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Sources: Monetary Authority of Singapore, Trading Economics, Bloomberg
+++26 March: Current conditions drop into negative territory for the first time in three years just as expectations stabilise+++
It’s an unwelcome premiere: For the first time in almost three years, current trading conditions of the Singaporean economy as depicted by the related indicator of our SiNGES have dropped into negative territory, if ever so mildly. Net trade just as manufacturing output have suffered a bout of weakness, though both managed to recover a bit just recently. Economic sentiment, however, remains subdued: Even though the expectations component of our SiNGES appears to have been stabilising at mid-range levels, source data such as PMIs and the official business confidence measure point to a very sceptical mood among Singaporean businesses. The Lion’s City economy unambiguously bears the marks of a slowdown not only of its principal trading partner, China, but also global trade in general. For the time being, these are mere spots on an otherwise still reassuring picture, particularly in terms of employment and the related propensity to consume of Singaporeans. That said, annualised monthly retail sales growth as a smoothed measure of actual spending has been drumming the retreat for almost two years now, having reached anaemic levels. We therefore anticipate the Singaporean economy to slow down further, leaving GDP growth in the current quarter prospectively even weaker than in the final quarter of last year. As ever so often, sensitive trading hubs such as the Lion City provide a reliable lead on what’s happening in the global economy – and Singapore is flashing amber right now.
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.