Few things annoy me as much as when our nation-building press gets carried away. Today’s front page of the Straits Times has a headline “Singapore posts surprise Q1 growth”, leading a story that speaks — as breathlessly as a teenage groupie — of “good news”.
It quotes unnamed economists saying that “the numbers point to the resilience of the Singapore economy”.
Then it gives the Star Award to the financial services sector, reporting — wrongly — that it grew “about 51 per cent over the previous quarter”, before discussing other sectors such as construction and manufacturing. Of the latter, it reported that it “contracted 4.7 per cent over the year.” Wrong again. It actually contracted by 10.4 percent when measured at current prices, and contracted 6.8 percent when measured in constant 2005 dollars. These are Greek-style plunges.
As for the “surprise” in the headline, it was only a surprise in view of the flash estimate made in early April of a 0.6 percent contraction. Nonetheless, it was excuse enough for the newspaper to megaphone its cheeriness, almost ignoring the fact that the economy as a whole showed only an anaemic 0.2 percent growth (yes, zero point two) over the first quarter of last year.
Overall, the newspaper tries to say that while there were bright sectors and dimmer ones, on balance, things are looking up. It took me no more than five minutes looking at the source data to see how slanted the news story is.
Let me explain.
If we want to talk honestly about how different sectors performed and contributed (or detracted from) the overall economic picture, we should take care to mention which are the important sectors, and which are not. Singapore’s statistics has about eleven significant sectors, of which the three biggest constitute 50 percent of our economy, value-wise. These three are:
- manufacturing, contributing about 19.5 percent,
- wholesale and retail trade, about 16 percent, and
- business services, about 14.5 percent.
Financial and insurance services is in fourth place, contributing about 11 percent by value.
In the table below, I provide the data by sector, with the sectors listed in descending order, value-wise.
You will notice immediately that the biggest and second-biggest sectors registered declines in the first quarter of 2013. This is worrying, especially when these two are also big generators of employment. Manufacturing provides employment for 14 percent of Singapore citizens and permanent residents in the labour force (“the resident labour force”); it is the second largest employment sector. Wholesale and Retail Trades provide employment for 15 percent of the resident labour force — the largest employment sector.
By contrast, the “star sector”, Finance and Insurance Services, is not only much smaller value-wise, it provides employment for only 7.4 percent of the resident labour force.
It would be much more responsible of a newspaper to ensure that its reporting of data is framed this way.
And what of the statement in the Straits Times, that financial services grew “about 51 per cent over the previous quarter”? It is probably taken from the press release by the Ministry of Trade and Industry (23 May 2013), which said “On a quarter-on-quarter basis, the sector surged by an annualised rate of 50.6 per cent.” The key words are “annualised rate”. Straits Times omitted them. If you look at the second paragraph of the ministry’s statement, it also mentions “seasonally-adjusted annualised basis” — which tells us that it is quite a different beast from blithely suggesting that this sector was 51 percent bigger in the first quarter of 2013 compared to the fourth quarter of 2012.
An emerging pattern from the data adds to my concern. Real estate (including construction) and finance are the growing sectors, but those sectors which we generally think of as the “real economy” — manufacturing, commerce — remain weak. It seems to suggest that our economy is being hollowed out and skewed towards asset trading and speculation.
The Ministry of Trade and Industry itself says, if you can parse the suspiciously opaque language, the expansion in the Finance and Insurance sector “was underpinned by robust growth in the sentiment-sensitive segment and the financial intermediation cluster amidst signs of stabilisation in the external environment.”
What on earth is the “sentiment-sensitive segment”? Do they mean stock market speculation?
And what is “financial intermediation”? Do they mean commission-taking and rent-seeking?
I am reminded of what happened to Britain post-2008 financial crisis. It fell into recession and has been barely afloat since. London in the years prior to the 2008 meltdown had been a high-flyer in international finance, but few people noticed how the UK’s manufacturing and trading sectors were declining. After the financial crisis swept in, the country struggled to recover, but its other industries do not have the strength and the export-prowess to pull the country up.
Stodgy Germany, that kept its focus on engineering and innovation, is the exact opposite example.
Is Singapore going down the same path as Britain? Should we be worried?
I have one question which I cannot answer. I hope more informed readers can help. Why is the gap between the year-on-year growth between 2005 prices and current prices so big in two sectors (“Ownership of dwellings” and “Utilities”)? Has inflation anything to do with it?