GDP growth was negative in 19Q2 for the first time since 15Q1 and with a magnitude not seen since 2012. Singapore’s economic cycle is a good predictor of the global cycle since it is highly open and a major trade hub, particularly for electronics. The cyclical pattern of Singapore shows how impactful the trade dispute was, since inventory-building led to a growth acceleration in Q1 to +3.8% (q/q annualized) and then an adjustment to the downside in Q2 (-3.4%). The contraction was broad-based, from a manufacturing recession (-6% in Q2, 3rd quarter of contraction in a row) to a turnaround in the service sector (+4.4% in Q1 – above medium run average – and -1.5% in Q2). Overall, early indicators of the cycle went down to levels last seen in mid-16 and consistent with a contraction (the electronics PMI was 49.2 in June). GDP growth should decelerate from the +3.2% seen in 2018 to +1.8% in 2019. There are clear downside risks but a negative figure should be avoided.
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Weekly Export Risk Outlook 17 July 2019