By Peter G. Hall, Vice-President and Chief Economist, EDC
Just when the Western World was worried about a serious double-dip recession, the unthinkable happened: Asia faltered. Rewind quickly to mid-2012, and the indicators for fast-growing behemoths China and India were tumbling, and with them, the fortunes of the region and global confidence. Since then, pundits have been on high alert for signs of further decay. Is Singapore’s economy, a noted regional bellwether, giving any clues?
GDP growth for Singapore certainly reflected last year’s wobble. Output posted a shocking 6.3-per-cent drop in the third quarter of 2012, a nasty tumble rivalled only by performance at the onset of the economic and financial crisis. The subsequent GDP figure was a relief, but at 1.8-per-cent growth, it was hardly an offset to the third-quarter crunch. Production of services boosted quarterly growth, while construction decelerated and manufacturing shrunk for a second successive quarter.
What are more recent data saying? Singapore’s leading indicator foretold the economy’s sorry third quarter, falling 2 per cent in the April-June period. But since then, it has seen back-to-back increases of 0.7 per cent, pointing to growth beyond the fourth quarter’s mini-rebound. Business expectations seem to agree – the sub-index for the important transportation and storage sector jumped in the fourth quarter of last year into positive territory for the first time since mid-2011. The financial services sub-index was in positive territory for a second successive quarter after a similar drought.
Buyers seem a bit more tentative. Singapore’s Purchasing Managers Index is still hovering in the neutral zone between growth and decay. However, in January the forward-looking new orders component moved above 50, indicating growth, and stayed there in February. What’s a lot more encouraging are the results of the electronics sector alone. This sub-index surged in January and February to the highest level since October, 2011, powered by a leap in new orders and new exports. Production is responding, and the backlog of orders now seems supportive of continued gains.
Shipping activity – a critical sign of regional conditions – is also gaining steam. Container traffic, battered by uncertain conditions in the middle months of the past two years, rose respectably in December and January. It’s too early to declare victory, but the positive movements are encouraging. Vessel arrivals are up, thanks to container and freighter traffic. Coaster and bulk traffic is also up, an early-stage sign of a pickup in regional production activity. Tonnage numbers also seem to indicate that the average size of container ships has risen over the past several months.
These increases are plainly seen in Singapore’s export numbers. January figures for non-oil exports interrupted a worrisome down-trend with gusto, surging by a spectacular 11.5 per cent on a monthly basis. Although one month does not a trend make, this key movement is an early sign that the weakness that characterized last year’s figures may indeed be giving way to brighter regional performance. These figures are not alone – early signs of positive movements are popping up across the region, suggesting that the strengthening of the US economy – also evident in Singapore’s trade numbers – is boosting the fortunes of international trade in East and Southeast Asia.
The bottom line? It may be too soon to conclude that a revival of Asian trade is in the works – but late-breaking data seem to demonstrate that Asia is shrugging off the temporary weakening in the middle of last year. It will pay to keep a close eye on these key data in the coming days and weeks.
This commentary is reprinted with permission from EDC. It is not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. Neither EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.