Singapore’s economy expanded more than analysts estimated in the third quarter, adding to evidence that increasing global demand is fueling the island’s manufacturing pickup.
Gross domestic product rose an annualized 1.2 percent in the three months through September from the previous quarter, when it contracted a revised 0.1 percent, the trade ministry said in a statement today. The median estimate in a Bloomberg News survey of 12 economists was 0.8 percent. The central bank, which uses the island’s dollar to manage price pressures, said it will maintain a modest and gradual appreciation of the currency.
Singapore’s manufacturing output has benefited from a recovery in overseas demand, even as the government implements a 10-year plan to reduce reliance on cheap foreign workers and boost productivity which has caused a labor shortage and pushed up wage costs. Data released yesterday showed China’s exports to the U.S., Europe and Southeast Asia increased from a year earlier in September.
“The big sequential turnaround was led by manufacturing and squares with an improvement in global demand,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “The policy hold has become a more balanced kind of proposition, as inflation risks are not as elevated.”
The city’s consumer prices rose 0.9 percent in August from a year earlier, slowing from a rate of 1.2 percent in July. The central bank today cut its forecast for inflation this year to 1 percent to 1.5 percent from an earlier estimate of 1.5 percent to 2 percent. Prices will probably increase 0.5 percent to 1.5 percent in 2015, it said in a statement.
The Singapore dollar gained 0.2 percent to S$1.2697 against its U.S. counterpart as of 10:13 a.m. local time. The currency has weakened about 0.6 percent this year.
The economy expanded 2.4 percent in the third quarter from a year earlier, after growing at the same pace in the previous three months, the trade ministry said today. The median estimate in a Bloomberg survey was for a 2.7 percent gain. The government has forecast expansion of 2.5 percent to 3.5 percent this year.
The Monetary Authority of Singapore guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band. A flatter slope allows slower appreciation or depreciation over time.
All 14 analysts surveyed by Bloomberg had said the central bank, which uses the exchange rate rather than borrowing costs as its main policy tool, would let the local dollar stay on a “modest and gradual” appreciation path.
“The Singapore economy should expand at a moderate pace in the quarters ahead,” the MAS said in a statement today. “Wage inflation is likely to remain relatively firm, and businesses in food-related and some services sectors could further pass on cost increases.”
Singapore’s manufacturing grew an annualized 1.2 percent in the third quarter from the previous three months, compared with a 15.1 percent decline in the second quarter, data showed today. Construction contracted 2.7 percent, while services rose 1.3 percent in the same period.