Independent Strategy

Macro Matters

July 2019

Independent Strategy Blog: Macro Matters
Singapore

17th July, 2019 » Singapore June Trade

While there was a bit of a base effect going on the underlying export story in Singapore remained very weak in June.  Indeed, in some sectors – electronics - we’re looking at weakness not seen since the financial crisis, even if this sector is fundamentally a shrinking one as manufacturers continue to relocate offshore.

Another positive surprise on the wages front with a strong pick up in the headline data. The rebound in weekly wage growth was partly due to a more favourable hours worked comparison though.  Hourly wage growth has been steadier.  Alongside steady inflation means real income growth has improved, continuing the recovery we’ve seen in recent months.

Stronger than expected rise in credit during June with the culprit appearing to be an increase in local government bond issuance, reflecting official efforts to support the domestic economy.  Loan growth continues to run well ahead of nominal GDP.  And with no underlying pick up in money supply growth the velocity measures also remain weak.

Slight upside surprise in June core consumer prices as headline y/y moved down amid the base effect.  The breakdown shows a further uptick in housing costs (shelter) while there has also been some upward movement in household furnishings and apparel (which was slightly less deflationary), perhaps reflecting tariff effects.

Consumer prices remained steady in June with prices actually falling m/m, which kept the y/y rate at 2.7%.  The backdrop would have been more encouraging had swine flu not taken its toll on meat prices while fresh fruit and vegetables have also soared over the past few months.

UK activity data for May somewhat better than expected, but this is largely due to volatility as industry juggled with the initial March Brexit data and resulting slide in production in April, notably the pre-planned auto sector shutdowns.  The underlying picture is still one of weakening activity

A positive surprise, particularly after the weak ADP number on Wednesday, with non-farm payrolls +224k in June, although there were mild downward revisions for the previous two months (-11k).

Factory orders missed once again with a terrible 2.2% m/m decline in volumes.  That has dropped the y/y rate to -8.7%, which represents a 117 month low and the 10th consecutive negative y/y reading.  In index terms we’re now down 11.3% from the December 2017 peak.

June ISM non-manufacturing index recorded a further decline and while the Final Markit Services PMI was revised up a little, the overall story remains brittle.  The ISM non-manufacturing report showed declines in the rate of activity, output and new orders with only export orders showing stability.

Another weak ADP private sector jobs report with just 102.2k jobs created in June.  That marks an improvement following the very weak May release but still drags the 3m average down to 132.7k, the lowest since July 2012.  The ADP breakdown bears out the problems of the construction sector, with a second consecutive month of declines while small businesses also showed another contraction in jobs.

Money supply continues to tick up again, but overall there is not much to suggest we’re in any marked re-acceleration phase, which is equally evident in the persistently weak money multipliers.  Credit data surprised on the downside thanks to some moderation in consumer demand for money.  Non-financial side looks stronger.

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