SG Economy

Economy: 2Q12 GDP unexpectedly fell 1.1% q/q annualized s./adj., vs est. +0.6%; 1Q12 GDP was revised down to +9.4% from +10%. 2Q GDP grew 1.9% y/y, below expectations of +2.3%. 1Q revised down to +1.4% from +1.6% Manufacturing fell 6% q/q vs +20.9% in 1Q; adding to signs of a deepening slowdown in Asian expansion as Europe’s debt crisis curbs demand for the region’s goods. The govt expects the economy to grow btwn 1% - 3% this year, slowing from a 4.9% rise last year and a record 14.8% expansion in 2010. OCBC says MAS is likely to adopt a cautious approach when it reviews its monetary policy in Oct. Notes the growth numbers have been coming in weaker than expected and the inflation numbers are starting to show signs of softening; wonders if the data are a harbinger of things to come in 2H12, with weakness in the services sector. ANZ however says the 2Q contraction in GDP is not nearly deep enough for the MAS to step in and expects the economy will be able to grow 2.7%-3.0% in 2012 even without any stimulus, of either monetary or fiscal variety. Believes Singapore's economy is likely to rebound in the second half of this year with China's economy likely having bottomed out and the U.S. economy recovery expected to start running more meaningfully. Nevertheless, China GDP due at 10am will likely overshadow any direction for currency/ equity mkts. OCBC notes anything below 7.5% for China's 2Q GDP growth will set the risk-off sentiment for the day.