In this briefing:
- UK Cycle: Bullish Trends Stretch Before Slowing
- Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
- Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness
- January Headline Data for China
1. UK Cycle: Bullish Trends Stretch Before Slowing
- UK employment growth increased further in Dec-18 despite GDP’s yearend weakness. Higher participation has bolstered the bullish trend but tends to be temporary.
- Slower employment growth need not prevent further falls in the unemployment rate, which looks to be creating an increasingly tight labour market.
- Wage growth is also likely to ease back in the new year, although the extent should be curtailed by an unwind of the depressed bonus share, in my view.
2. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
Last week, Uzbekistan placed a debut Eurobond, which attracted high interest from investors. Following a change of leadership in 2016, the country embarked on a path or rapid development. So far, its reform record has been quite impressive. However, new challenges often arise during periods of rapid transition. We expect both demand and supply-related pressures to lead to a rise in headline inflation towards the 20% mark in the next 12 months. We think that given the evidence of a rapid deterioration in the trade and current accounts in 2018, further depreciation of the local currency should be expected in the short term. Investors who have bought the Eurobond, or consider participation in further placements by Uzbek corporate issuers in the coming months, should watch out for signs of the build-up of persistent imbalances in Uzbekistan’s economy.
3. Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness
Singapore’s growth in 2017 and 2018 has been primarily productivity-driven, suggesting that the 5-year project of reducing dependence on foreign workers (of all skill levels) is finally bearing fruit. The 2019 Budget further lowered the ceiling on employing foreigners in the services sector, and withdrew the NOR scheme from 2002 that was aimed at attracting senior executives with regional/global roles.
The healthy twin surpluses are evident even amid the fog of ultra-conservative fiscal accounting (which excludes land sales and investment income from GIC, MAS and Temasek from revenue, and only includes a small part of their past earnings as a “net investment return contribution”). The small stimulus was aimed mainly at providing a slew of health and other benefits to those born between 1950 and 1959 (the “Merdeka Generation”); the previous “Pioneer Generation” having already been rewarded previously. These are sensible interventions to reduce inequality.
This year, we estimate that Singapore’s real GDP will decelerate to 2.8% growth (from 3.7% in 2017 and 3.2% in 2018) as the global electronics cycle turns downward — evident in the sharp slump in non-oil domestic exports in Dec18 and Jan19. But Singapore’s twin surpluses have ample room to provide a substantial fiscal stimulus should the global economy worsen substantially further.
4. January Headline Data for China
Sometimes at Balding’s World we explore worm holes of Chinese data. Yes, granular data is awesome, but the global economic calendar should not be overlooked nor headline data taken for granted. To that end today we take a look at some key figures to recently emerge.
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