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A Singapore Swing?

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By Peter G Hall
Vice-President and Chief Economist Export Development Canada

News out of Asia isn’t great at the moment. Most of it is focused on China, and the reaction has been turbulent. At its core is concern about the state of world trade. Asia’s Pacific Rim is a key commercial hub, so if things aren’t well in the export world, they’ll show up fast in this trading nexus. Singapore is at the heart of this activity. It’s a well-known and trusted bellwether of Asian – and global – trade flows. What’s the story that its key indicators are telling us at the moment?

If the direction of Singapore’s trade data was a disappointment in 2008, its value as a leading indicator sure wasn’t. From the peak of activity in late 2007, Singapore’s non-oil exports fell 11 times in 15 months, knocking off a total of 27 per cent of activity. It was a sure sign that something was amiss, and astute observers took quick action. China saw what was happening, and swiftly put together the first of an aggressive series of stimulus efforts. Others were slower to react, and paid the price in the short term.

The effect of global stimulus was seen in Singapore’s rebound. Non-oil exports were back above their previous peak by mid-2010. At this point, they foreshadowed the Great Flattening that held the world in its grip for the next 30 months. America’s mid-2013 revival showed up in Singapore’s numbers, as have the subsequent serial disappointments that have held a tight rein on revival. Things were sure looking good at the end of 2014, but weather, a US port strike, the Greco-gauntlet and financial market turbulence put paid to growth. Add to that Sino-centric chaos, and you’d expect to see red ink all over Singapore’s statistics. But that’s not the case. What’s going on?

At first blush, Singapore’s numbers don’t look great. Non-oil exports are up 2.2 per cent year-on –year, and the year-to-date numbers are the same. However, things have picked up recently: in the last two months, non-oil exports are up almost 9 per cent at annual rates. Then consider that Singapore-sourced exports have not done particularly well. Re-exports – those international goods that simply flow through Singapore’s ports – are up 5 per cent year-on-year, and have risen over 20 per cent at annual rates in the last two months.

It gets even better. When the data are narrowed down to the global zones where activity is firing up, Singapore’s export stats are up dramatically. Putting together the United States, the top five in the EU and Mexico, Singapore’s non-oil exports are up 10 per cent year-on-year and have risen 10 per cent at monthly rates in each of the past two months.

Naysayers will point out that even so, there isn’t a clear up-trend, and that two months isn’t nearly enough to go by. And they’re right – except that there were clearly temporary events that held back global growth in the first half of the year, and most of those are now behind us. Sure, there is still a good deal of turbulence, but in our view, that turbulence is inextricably attached to the renewed growth that we are seeing. In short, markets are being rocked not by neo-weakening, but by the pressure that growth is putting on the Fed to tighten up monetary policy. As such, the nascent upswing in Singapore’s exports could indeed be the first of a string of increases that herald the spread of growth from the engine to the rest of the train.

This would still be wishful thinking if there wasn’t clear evidence that the recent glimmer of growth can be sustained. It has long been the case that America has huge potential growth in its housing, consumer and business investment sectors. Europe is also showing signs of pent-up pressure after its protracted, austerity-induced hibernation. Markets most closely attached to these are the instant beneficiaries – witness recent trade activity in Canada and Mexico – but currency shifts virtually guarantee that others aren’t far behind. Something big seems to be in the works in world trade, and it bears keeping an eye on Singapore’s numbers as an immediate and reliable gauge of progress.

The bottom line? It sure looks like the beginnings of a Singapore swing. It might not be obvious in overall numbers, but given the pattern of revived growth, the details Singapore’s prescient stats seem to closely track the planet’s hot spots. If they ignite growth through global trade in the usual manner, we expect that this bellwether economy’s figures will soon tell the tale.


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