The month of July becomes good news for everything. It all began with the amazing jump of GDP growth figures for this year’s second quarter, which the economist quickly saw that the year growth estimates has inclined.
Then, based on property data, the second quarter of 2009 was among the best performing on records, with numbers of new home sales that exceeds than those of 2008. Resale price index of the Housing and Development Board also reached its peak for the quarter. Although, industrial production declined in June, the NODX had increased by 7.6 percent during the quarterly terms. Finally, the Singapore stock exchange has been rebounded smoothly.
However, the good news is not in accordance with the official economic forecast. After the revision of the growth forecast in 2009, the Ministry of Trade and Industry (MTI) stated: “Notwithstanding the improved performance in the second quarter, the outlook for the rest of the year remains largely unchanged – of a weak recovery susceptible to downside risks”.
This is largely attributed to the continued decline of the global economy, with MTI mentioning the unemployment growth and the decreased household spending in Euro zone and in the US. It added the continued decline of housing markets in several leading economies, while the financial institutions are still on the process of strengthening their figures. “At this juncture, there is no evidence yet of a decisive improvement in final demand”, MTI added.
As the Singapore economy is very reliant and is open to the global economy, it becomes an interesting fact that the country’s asset markets are capable of running in advance for an economic recovery. There are, however, certain reasons about this. Among these reasons are the inventory restocking of electronics and the manufacturing output of biomedical, which increased the GDP numbers. But the MTI said that both industries may not last long.
Lately, Prime Minister Lee Hsien Loong drew attentions to the upcoming economic issues. “For the next couple of years – 2010, 2011 – we don’t know how the world economy will be, and how that will affect us and what we can do about it”, PM Lee said. US officials also expressed their cautions as to when the economic recovery will prosper. Additionally, it will take time before the US recovery reach Asia.
Yet, everyone have the property and stock market exuberance. One of the major reasons for this is the volume of liquidity sloshing throughout the world at the times when every monetary policy is just as easy as everywhere. However, this will not last for a lifetime and at some point of time, monetary stimuli will be withdrawn; thus, the market needs to be supported by better economic fundamentals. Market players, on the other hand, should be aware about this. They must be wary that, at some point, economic curve is ahead of them and, sooner or later, reality check in stock market must take effect.