Singapore economy grew 1.3% in Q3

Thanks to stronger manufacturing sector.

According to DBS, the economy grew by 1.3% (QoQ, saar) in the third quarter based on the final GDP estimates announced this morning. That translates into a stronger than expected 5.8% YoY expansion.

Here's more:

Manufacturing grew by 5.5% YoY, higher than the advance estimate of 4.5%. A spike in electronics raised overall industrial production growth to 9.3% in September, leading to this upward revision. This alone has added an additional 0.28%-pt increase to the headline GDP growth number.

Construction grew by 5.3% YoY, also higher than the advance estimate of 3.6%. A healthy pipeline of projects will continue to underpin growth momentum in this sector despite problem of margin compression, mainly due to higher operating costs.

Most importantly, key services sector also put up a stronger showing. It recorded growth of 6.3% YoY in the quarter, as compared to the advance estimate of 5.7%.

Strong improvement in regional growth outlook has drove expansion in the trade related, tourism and financial services sectors.

Expect the growth momentum in this sector to pick up in the coming quarters against the backdrop of the stronger external growth outlook.

As expected, the official forecast has been revised up to 3.5-4.0% on account of the strong growth performance in the quarter. This should not come as a surprise given that even if the economy remains stagnant in the third and fourth quarter, that is, zero growth on the margin, full year growth will still be able to clock 3.6%.

Moreover, chance of a sharp sequential pullback in 4Q13 appears low at this juncture given the outlook in the global environment. This also put our full year GDP growth forecast 3.8% nicely in the middle of the range.

Growth outlook in the G3 economies is improving while China’s growth momentum is also picking up. We expect such growth momentum to persist into 2014. These factors will keep Singapore’s GDP growth at a healthy pace in the coming quarters.

We expect GDP growth for 2014 to register 4.0%, which is at the top end of the newly announced official GDP forecast range of 2.0-4.0%.

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