SG Economy

Economy: Singapore’s economy unexpectedly contracted in 2Q14 after manufacturing slumped, hurt by a tighter labor supply. 2Q14 GDP fell an annualized 0.8% q/q vs Bloomberg consensus estimates for a 2.4% gain. Singapore’s government has stepped up efforts to lure new industries such as R&D as it reshapes the economy while cutting reliance on cheap overseas workers. Manufacturers are grappling with higher costs in a tight labor market, even as recoveries in the U.S. and Europe improve the outlook for the island’s exports. DBS says “The effect of restructuring is biting and companies are feeling the pain. We’re seeing very pronounced moderation in the services sector, as they suffer from a severe labor crunch.” 2Q14 GDP expanded 2.1% y/y, after growing a revised 4.7% y/y in 1Q14, and slower than the median estimate of a 3.1% gain. Manufacturing fell 19.4% in 2Q14 from the previous three months. Services rose 5.2% in the same period, while construction gained 2.6%.