Economic Sentiments In Singapore

Many macroeconomic data series, including Gross Domestic Product (GDP), are published with a lag. The problem of data lag is partially mitigated by the use of more regular activity-based indicators such as the monthly industrial production and retail sales indices. Such indicators are further complemented by survey-based sentiment indices which measure economic agents’ perception of the outlook of the economy in the near future.

In this study, we tap on unconventional data sources to obtain a higher-frequency and more real-time measure of economic sentiments in Singapore. This is part of our effort to expand the use of high frequency, real-time data to complement traditional indicators for better monitoring of the health of the Singapore economy.

Role of economic sentiments in understanding the health of the economy

Economic sentiments play a role in influencing economic outcomes (Throop, 1992). For example, the level of optimism in the economy can affect consumers’ saving and spending activities, business owners’ hiring and capital expenditure plans, and the amount of credits available to businesses. Both activity-based indicators and economic sentiments are thus important barometers for assessing the overall health of the economy and can offer new insights to policymakers. For instance, when both economic sentiments and activity-based indicators are positive (negative), they may reinforce each other to increase the likelihood of an improving (deteriorating) economy. On the other hand, mixed signals could suggest that the economy is at a turning point.

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