SINGAPORE'S economy is growing at the slowest clip since the global financial crisis, according to flash data for the first three months of the year.
Services proved resilient and construction has finally returned to positive territory, but the slip in manufacturing - amid a gloomy global environment - led analysts to warn that factories have not yet hit rock bottom.
Singapore clocked year-on-year gross domestic product (GDP) growth of 1.3 per cent, just shy of private-sector estimates, the Ministry of Trade and Industry (MTI) said in a flash release on Friday morning.
The advance estimates, based on January and February data, show a slowdown from the 1.9 per cent growth in the final quarter of 2018. The GDP growth, easing for the fifth straight quarter, also touched a decade low.
Still, Mohamed Faiz Nagutha, Asean economist at Merrill Lynch, believes that the final print could be yet revised upwards, and added in a note that the slump "was primarily due to unfavourable base effects".
After all, on a quarter-on-quarter and seasonally adjusted basis, the economy grew by 2 per cent - faster than the previous quarter's 1.4 per cent. DBS senior economist Irvin Seah, citing the quarterly pick-up, added that "the economy is far from a recession".
"Besides a weaker global outlook, the sub-par headline growth figure is also partly due to the high base effect in the manufacturing sector in particular, as well as the lag effect of the trade war associated with the risk-adverse behaviour of manufacturers," he wrote in a note.
It was manufacturing that weighed down the quarter's performance, with a decline of 1.9 per cent - a reversal of the 5.1 per cent growth notched in the previous quarter, and the end of an 11-quarter growth run. As to why, the MTI has fingered the falling output in precision engineering and electronics.
But Selena Ling, head of treasury research and strategy at OCBC Bank, said that it "may be too early to call a bottom for the domestic manufacturing and electronics industries" until the US sorts out its trade and tariff plans for China, Japan and Europe.
And economists Chua Hak Bin and Lee Ju Ye, of Maybank Kim Eng, were bearish in expectations of "a weak manufacturing and trade recovery in the second half", depending on whether a US-China trade deal pans out soon.
Still, positive contributions from services and builders soothed some of the sting from Singapore's factories, which have been battered by the cooling electronics cycle, a slump in the Chinese economy, and the trade war between the United States and China.
The services industries pulled their weight, with year-on-year growth of 2.1 per cent - compared with 1.8 per cent in the quarter before - with a lift from both information and communications, and business services.
On top of that, the construction sector has returned to growth mode, after a downward jag lasting 10 straight quarters. Its expansion of 1.4 per cent, which has topped off a gradual recovery, was attributed to an improvement in private-sector construction activities.
Watchers did not miss that last July's snap property cooling measures could eventually put a crimp in construction's rebound - "but that's probably a story for 2020", Mr Nagutha said in an e-mail to The Business Times.
Irene Cheung, senior strategist for ANZ Research, also expects the private-sector boost to construction to last through the rest of this year. "Indeed, investment is where we forecast a stronger contribution to growth," she told BT, adding that she expects investments to be sustained by both collective-sale redevelopments and ongoing public works.
Economist Tan Khay Boon, senior lecturer at SIM Global Education, noted that "the weight of the construction sector is light", relative to other sectors. "Moreover, the interest rate is likely to remain stable in the near future, which helps to sustain demand for houses, and this will keep the construction sector going," he told BT in an e-mail.
But doubts about the economy still linger beyond the manufacturing decline, with Ms Ling from OCBC arguing that "the question remains if global green shoots will take root and sprout" in the second half of the year.
"Until we see a clear bottom and subsequent improvement in the China and global growth prospects, the overall picture for the Singapore economy remains cautious," she wrote in a morning note.
Vishnu Varathan, head of economics and strategy at Mizuho Bank, also noted that the services industries are heavily dependent on trade and manufacturing - and could still see mortgage and real estate services brought low by the real estate cooling measures.
DBS's Mr Seah was cheerier. He wrote that "the economy has reached the bottom of the current growth cycle", and pinned his hopes to a policy stimulus in China and stable monetary policy worldwide, which would fan a pick-up.
The Government's official full-year forecast is for GDP growth of between 1.5 per cent and 3.5 per cent for 2019, leaning towards "slightly below the mid-point" of that range. But Dr Chua and Ms Lee said that it's likely this will be cut by half a percentage point, as the year wears on.