2Q 2012 GDP

Kim Eng on 16 Jul 2012

2Q 2012 real GDP shrank -1.1% annualized QoQ and expanded +1.9% YoY. Consensus was looking at the economy to expand by +0.6% sequentially and +2.3% from a year ago. In 1Q 2012, the economy grew +9.4% QoQ (annualized) and +1.4% YoY. Updated 2Q 2012 GDP figures based on full three months data will be out in Aug.

Manufacturing reflected the GDP’s QoQ and YoY split as services and construction growth weakened on both counts. Manufacturing sector’s annualized QoQ and YoY growth were -6% (1Q 2012: +20.9%) and +3.0% (1Q 2012: -0.8%) respectively. At the same time, last quarter saw slower growth in services (2Q 2012: +0.4% ann. QoQ; +1.0% YoY vs. 1Q 2012: +2.7% ann. QoQ; +1.9% YoY) and construction (2Q 2012: +0.3% ann. QoQ; +5.1% YoY vs. 1Q 2012: +27.9% ann. QoQ; +6.9% YoY).

Data underscores Asian NIEs susceptibility to global conditions. Singapore’s advanced estimate of 2Q 2012 GDP and South Korea’s unexpected 25bps cut in its benchmark interest rate last week highlight the vulnerability of Asian NIEs economies to the swings in global economy and financial markets, especially amid Eurozone woes and China’s slowdown last quarter.

Our 2012 real GDP forecast remains at +3% (2011: +4.9%) for now (official forecast: 1%-3%). Crucial trends to watch in this early part of 2H 2012 will be signs that China’s growth slowdown bottomed last quarter, no risk of a sharp slowdown or stagnation in the US economy, and stabilization in the Eurozone sovereign debt crisis.

With eyes now firmly set on policy events. The Monetary Authority of Singapore (MAS) next policy review in Oct 2012 will be a high importance event. By then, the direction of the economy and inflation in 2H 2012 would have been clearer. We also do not rule out off-Budget measures to stimulate the economy like in 2009 should the downside risk to growth intensifies.