The Ministry of Trade and Industry’s advanced estimates revealed that Singapore’s gross domestic product grew 2.5 percent year-on-year in the past quarter ending in June.
Similar to the last quarter, the manufacturing sector led the GDP increase. The sector expanded by 8 percent in the second quarter of the year, extending its previous 8.5 percent growth.
This growth in manufacturing was supported mainly by the electronics and precision engineering clusters, which saw strong expansions on the back of robust external demand for semiconductors.
According to HSBC economist Joseph Incalcaterra, Singapore remains bullish in this sector given the assumption of a strong rebound in industrial production (IP).
“Within the advance GDP estimate, the ministry assumes a strong rebound in June IP of approximately 7.0 percent mont-on-month seasonally-adjusted, according to our calculations, which brings us to Q2 growth of 8.0 percent,” he said.
He furthered, “This is not impossible to achieve, particularly given the fact that semiconductor production is expected to remain strong as Asia’s iPhone supply chain ramps up,” he said in a report.
Meanwhile, the construction sector remained lacklustre, contracting 5.6 percent following the previous quarter’s 6.1 percent decline.
Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye said the sector continues to be the weakest link.
“The government may have added to the pain with another foreign worker levy hike in July for construction. Recent strong private sector property sales may help the construction sector closer to year-end,” the two analysts said in a flash report.
On the other hand, the services producing industries recorded a measly 1.7 percent growth in the quarter, moving at a faster pace that the preceding quarter’s 1.4 percent. The sector received a strong boost from the transportation & storage and business services sectors.
The Maybank Kim Eng analysts said services will also be supported by the finance & insurance and wholesale & trade sectors, given the rise in loans in the months of April and May.
Incalcaterra noted that Singapore continues to have a “two-speed economy”, after months of endless upside data surprises.
“As such, we see little risk that growth exceeds the government’s 2-3 percent forecast range,” he said.