Singaporean economy likely to have expanded in Q1 2018, inflation to have accelerated year-on-year

Singapore’s economic growth data for the first quarter is set to be released this week. According to a DBS Bank research report, the economy is likely to have grown 4.5 percent year-on-year and 2 percent on a sequential basis in the March quarter. This is expected to have been driven by a strong showing in the manufacturing sector and underpinned by further rebound in the services sector growth.

The former continues to be well-supported by buoyant demand although the growth trajectory is flattening out. On services, high frequency data on services such as loan growth, financial market turnovers and container throughout have all continued to grind northward, suggesting potentially more upsides to the sector’s growth. In the meantime, though the construction might continue to contract, the rate of decline is expected to ease, implying that the worst for the sector could be over, stated DBS Bank.

Meanwhile, Singapore’s inflation is expected to have accelerated to 0.5 percent year-on-year in April. According to DBS Bank, the inflation is likely to be on a gradual upward trend in the months ahead. This partially explains the policy decision by the MAS to return to an appreciation in the recent policy meeting. Beside the turnaround in energy prices and dissipating high base effect from housing and utilities, the accumulated slack in the domestic economy is also easing along with the rebound in the labor market. Headline inflation is expected to rise above the 1 percent level in the months ahead, stated DBS Bank.

Also, the industrial production data is set to be released this week, and is likely to have grown 8.8 percent year-on-year. Electronics production is expected to have stayed strong while added impetus might come from the biomedical clusters. Recent PMI readings are also implying a still fairly sanguine outlook for the overall manufacturing sector, albeit at a slower rate of growth, added DBS Bank.

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