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Something Stirring in Singapore?

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

Arguments are common among economists. It’s often said, ‘two economists, three opinions.’ The mix of economic stagnation, bizarre one-off events, geopolitical turmoil and widespread frustration over the past several years has served up a lot more stuff than normal to battle about. But it gets really complicated when the data themselves declare force majeure and argue with each other. To make matters worse, at the moment it’s that elite class of data, the leading indicators, the ones with foresight, that are battling it out. If even they can’t agree, then what can we possibly expect analysts to do?


What analysts can agree on is that conflicting leading indicators have added to general confusion. There are indicators on the real side of the economy – US housing markets and consumption of durable goods are on the A-list – which in certain cases are quite positive. Then there are other indicators in the financial world – stock market indexes and copper prices come to mind – that are pointing decidedly downward. Yet this cycle’s extraordinary liquidity measures have thrown these into question. If so, we ought to be paying more attention to the ones more closely linked to real activity. Is there a head-turner out there?

Actually, there is. When it comes to global trade flows, Singapore is a known bellwether. Its economy creates a lot of goods for export, but it is also a key global transshipment zone. If things start to move there, then it almost always has implications for several economies in the region. It’s in the shipping data that things are starting to move. Vessel arrivals have been rising steadily since late last year, and are now up 6 per cent compared with mid-year 2015, the best stats in three years.

Tonnage numbers for the port are doing even better, up 10 per cent over May, 2015, and the highest year-to-year growth rate since mid-2012. Bulk cargo is driving the increase, posting huge monthly increases since February. However, general cargo has also swung out of a down-trend after a 12-month funk. Container throughput is also up sharply in the last few months, now rising on a year-to-year basis for the first time since February, 2015.

Similar statistics for other ports are nothing like Singapore’s. Most of them are holding roughly at the same levels they’ve notched over the past few years, with little sign of a break in the trend. This is true of ports in the rest of Asia, North and South America and South Africa. It is also occurring amidst a glut in global shipping capacity, and increasingly gloomy results for the Baltic Dry and Harpex indexes of global freight rates.

In this context, how is Singapore bucking the trend? Is it gaining market share at the expense of others? Not likely; no other port is showing a significant down-trend, and it is unlikely that Singapore would have the same negative effect on all other ports collectively. Also, it doesn’t seem to be signing on more ship registrations than other ports. It’s possible that the explanation is, once again, that Singapore is first out of the gate, with others to follow. Perhaps it is capturing activity related to lower global oil prices, which not only make shipping costs lower, but more importantly, boost cash flow and economic activity in nations that are net importers of crude. It could be that China’s ever-wealthier consumers are catching on (there is interesting movement in incoming goods traffic in Hong Kong). It’s also possible that Singapore’s connection to India – now growing faster than China – is paying off. Time will tell; for now, the growth itself is exciting.

With little external corroboration of the U-turn in Singapore’s shipping data, the best we can do at present is watch and wait. It’s also important to remember that, with the exception of oil shipments, cargoes moving in and through Singapore are still a good bit lower than at the previous peak in 2014. They may be mounting a comeback, but they are still a good distance from setting new records. As such, the broader impacts on investment and employment are still not affected by current movement. However, if sustained, today’s growth will in short order begin to drive employment and investment decisions, especially if shipping activity elsewhere is also on the up and up.

The bottom line? Singapore’s shipping data is on an upswing. Economists will argue about whether this is really significant – until either the trend catches on elsewhere or fizzles out. Right now, there’s enough growth to capture the attention, and at the very least, it’s worth keeping an eye on.

[Source: EDC]


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