Singapore GDP unexpectedly shrinks on weaker output

This article belongs to the Singapore stagflation watch story arc.

bloomberg.com :

Singapore's economy unexpectedly contracted last quarter [2007Q4] as factory output slowed, suggesting Asia's export-dependent markets may face increased risks from slower global growth. Gross domestic product shrank an annualized 3.2% after adjusting for inflation, the first decline in 15 quarters, and followed a revised 4.4% expansion in the third quarter, the trade ministry said in a statement today. Economists were expecting a 3.1% gain.

"We definitely should expect to see more softness in exports in the next couple of quarters, and that's bad news for electronics-heavy Asian economies," said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. "That means slower growth for Singapore and the rest of Asia." "There's no imminent turnaround in electronics and we're unlikely to see a recovery in the next six months," said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. "Pharmaceuticals, a key support for manufacturing, has been losing steam." Singapore's electronic exports have dropped each month since February, mired in the worst slump in five years.

Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state's government implemented measures to cool the property market. Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world's largest banks. "Singapore's financial services industry has been affected by the shadow of the subprime problem," Seah said. "Investors are more cautious and that has slowed down activity."

- This is huge. The "economists" were off the mark by a whopping 6.3% : 3.1 - (-3.2) = a 6.3% swing. Talk about missing your target by a mile.

So what do we have here? We have slowing economic growth and inflation. At the same time. Stagnant/slowing economic growth + increasing inflation = stagflation.

If this goes on, the ruling party's theory of "better jobs to fight inflation" goes right out the window. Going forward, where would "better jobs" come from in a period of stagnant or slowing economic growth? Do not forget that job creation is a *lagging* indicator, *not* a leading indicator. Except for the very high end, wage increases generally have not quite kept up with rising inflation. The middle class is so very screwed.

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