In today’s briefing:
- Climate Change Will Alter the Global Picture of Food Security
- Long Road Ahead for Productivity Growth in Singapore
- Resilient Activity Raises Forward Rates
- Did Equity Investors Just Give Up on Inflation Hopium?
Climate Change Will Alter the Global Picture of Food Security
- Climate change is hurting agricultural yields due to irregular weather conditions or natural disasters, raising the salience of food security everywhere including in Asia.
- India’s recent export ban on white rice is merely the tip of the iceberg of economic nationalism to secure domestic food supply that could undermine food security for others.
- These beggar-thy-neighbour decisions will also reverse hard-won efficiencies in the global food supply chain, and potentially stoke domestic political tensions.
Long Road Ahead for Productivity Growth in Singapore
- Feeble annualized total factor productivity growth of 0.008% in the post-2008 decade cannot be explained just by Singapore’s status as a developed market.
- Lagging innovation in SMEs, inconducive social attitudes to entrepreneurialism, government-induced barriers to entry, and weak research-industry links are also possible culprits for the productivity slump.
- “Business-As-Usual” solutions of tax breaks and skills training are no longer sufficient.
Resilient Activity Raises Forward Rates
- Activity data have kept skewing towards surprising resilience. Price and wage inflation drive current policy decisions, but activity is critical to the outlook.
- The resilience of GDP growing near its potential pace means the current effective policy setting doesn’t look that tight. Neutral rates may be near pre-GFC norms.
- Policymakers can wait for evidence that cyclical excesses have gone before turning to relatively small and late cuts. Policy hysteresis only compounds this pressure.
Did Equity Investors Just Give Up on Inflation Hopium?
- The latest US CPI report again offered inflation bulls ample room to push equity markets higher.
- Yet, unlike previous CPI reports, the S&P 500 Index could not hold on to its gains.
- Recent developments provide the first evidence that the inflation-market dynamics are changing as Powell took away Federal Reserve hopium.
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