Singapore’s Economy Contracts In The Third-Quarter: What Investors Should Know

Earlier this morning, the Ministry of Trade and Industry (MTI) released advance estimates of Singapore’s third-quarter gross domestic product (GDP) figures.

On a seasonally adjusted quarter-on-quarter annualized basis, Singapore’s GDP suffered a 4.1% decline in the third-quarter. It represents a huge drop from the 0.2% expansion seen in the second-quarter.

The brighter side is that Singapore’s economy managed to show slight year-on-year growth of 0.6% in the third-quarter.

The manufacturing sector did not have a good time during the quarter. It experienced a 17.4% quarter-on-quarter drop and a 1.1% decline when compared to a year ago. According to the MTI, the contraction in the manufacturing sector was mainly due to a drop in output from the transport engineering, biomedical manufacturing, and general manufacturing clusters.

Singapore’s central bank, the Monetary Authority of Singapore (MAS), does not appear to have been significantly alarmed by the data from the MTI. The MAS held its semi-annual review of its monetary policy earlier today and decided that it would not implement any easing measures. The central bank would be keeping its exchange-rate policy unchanged. It explained:

“MAS assesses that a neutral policy stance will be needed for an extended period to ensure medium-term price stability. The current policy band provides some flexibility for the S$NEER to accommodate the near-term weakness in inflation and growth”.

Things are certainly not looking bright at the moment for Singapore’s economy. However, this does not mean that all businesses in the country are going to suffer. In fact, some of Singapore’s largest companies such as Singapore Airlines Ltd  (SGX: C6L), Comfortable Corporation Ltd (SGX: C52), and SIA Engineering Company Ltd  (SGX: S59), have all seen strong growth in profit this year.

This tells us something important about investing: Although a country’s GDP numbers tell us how the economy is doing on average, it does not provide us with any insight on how individual companies are doing. Remember this when you are investing.

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