Forex »

Drop in Singapore Inflation

James Boston
Share on StockTwits
Published on
www.finances.com
Drop in Singapore Inflation

General price growth in Singapore remains healthy according to the inflation figures just published for the month of June. Year on year the headline rate is now at 1.8%, this compares to the 2.7% experienced in May and market consensus estimates were for a level of 2.4%. Month on month the inflation number is running -0.7%, this is in comparison to a 0.5% reading the previous month and a market consensus estimate for 0.15%.

As the Singapore dollar continues to toy with eight month highs the Monetary Authority of Singapore (MAS) appears content to leave the countries interest rate at the near zero level of 0.06% that was reached following a cut from 0.2% last month.

Economic growth in the city state has stalled for the first time in almost two years as the latest GDP readings for the second quarter of this year show a moderate 0.8% drop. The unanticipated fall in economic output is being attributed to a large-scale fall of in manufacturing output during the early months of this year. Analysts are highlighting a one off move by a major electronics manufacturer to offshore its production as the major contributing factor to the fall in factory output. The concern in the markets is that this one off drop in manufacturing becomes a trend, Singapore is in the process of reconfiguring it’s economy away from manufacturing and towards more value add sectors such as biotechnology. This reconfiguration however is not taking place at the pace planned by the authorities and as a consequence Singapore finds itself somewhat caught between two economies, a rapidly shrinking manufacturing sector and a very gradually growing new economy sector.

Despite the fact that Singapore’s economic reconfiguration is not occurring according to the planned timeline there is still healthy growth anticipated for the remainder of the year, this however has recently been revised down from 3.5% to 3.0%

Share on StockTwits