SINGAPORE: CONSUMERS WANTED.

The charts above present two different views of Singapore's GDP. Both tell a similar story. The Republic's GDP is quite volatile.

Looking first at the quarterly results, the Monetary Authority of Singapore initially forecast fourth quarter results to come in at 5.8 percent. But at year's end, Business Day (Singapore) quoted Singapore's Prime Minister in his New Year's Day message as saying the last quarter would show year-on-year growth of 5.4 percent, and only 2.4 percent compared with the previous quarter. These statistics were based on flash estimates using October/November data.

Nonetheless, the trend line (in blue) shows GDP sharply ascending in contrast to the nearly flat trend line (in yellow) in the annual data with an International Monetary Fund (IMF) 2005 forecast. In regard to that forecast, showing GDP growth at the end of 2005 at 4.4 percent, it should be noted that it is consistent with the consensus forecast between 3 and 5 percent.

The slowdown is based on widely held expectations that the world economy will experience a cooling during 2005. In addition, economists expect the world demand for electronics to decline. And in particular, Singapore's exports are likely to fall. But, again according to Business Day, the slowdown will not be visible in the Republic's GDP until mid-year.

Until then, the economy, especially where consumers are concerned, will continue on its upward path. The strong showing for the first three quarters of 2004 benefited from Singapore's recovery from the SARS epidemic, and demand for exports, according to a year-end report from the Ministry of Trade & Industry.

Improvement in the unemployment situation is also a positive factor that will influence consumer spending, according to the Ministry.

In the third quarter the consumer price index was down 1.7 percent from the previous quarter. Healthcare gained 5.9 percent and education gained 3.9 percent. Food was also 2.3 percent more expensive because of the widely reported poultry ban. Higher oil prices also put pressure on the index causing the transport and communications sector to increase 1.8 percent.

Two sectors had a positive effect on inflation. Clothing prices came down 0.5 percent, and housing costs declined 0.3 percent.

What are consumers buying?

As of the end of the third quarter 2004, sales of wearing apparel and footware were strong.

Growth of total retail sales was actually lower in the third quarter than the second, coming in at 10.1 percent as opposed to 14.1 percent in the second quarter. Motor vehicle sales were 2.4 percent of the third quarter total. Growth or not, an economist interviewed by Business Day said the volatility shown in the charts on page 1 is a problem.

It makes Government planning difficult, and hampers management of the employment situation. By extension, this would affect consumer confidence, and therefore spending. The economist's solution: Double the population. One way: Allowing an influx of foreign workers. More consumers would provide much needed stability.

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