The Monetary Authority of Singapore (MAS) has created a new index to track the economy, and it has indicated that Singapore’s economic activity peaked in May following a rapid run-up of nearly six months.
The newly-constructed Economic Activity Index (EAI), which comprises over a dozen coincident indicators across several economic sectors, began to fall in June, headed mostly by declining pharmaceutical production.
The index turnaround is in line with the third quarter advance GDP estimates released in the middle of October, which showed a sharp decline in overall growth momentum following a record sizzling pace in the first half.
The economy shrank by approximately 20 percent in Q3 on a sequential basis, which reflect both a contraction in biomedical manufacturing and expected correction from the sharp recovery.
Created in Q3 2010, the EAI is a product of the Economic Policy Group of MAS, making its debut in the October Macroeconomic Review of the central bank.
The monthly composite index consists of trade-related indicators including industrial production, sea cargo and air cargo, as well as financial measures like stockmarket turnover, forex turnover and bank loans. Other indicators in the line-up include tourist arrivals, certified construction payments, IDD call volume and retail sales volume.
Since these indicators are available at a higher frequency, the index complements the Department of Statistics’ quarterly advance GDP estimates and provides useful information about monthly movement in any given quarter, said MAS in its macroeconomic report.
Through this coincident index, “we hope to have a better sense of the current quarter’s economic activity”, said a MAS spokesperson to The Business Times.
A breakdown of the individual indicators illustrates that majority of the financial and trade measures began to decline in June. Only Asian currency unit (ACU) loans and retail sales volumes continued to rise in both June and July, though the increase for both indicators slowed in August.