Busy data week with eye on IPI
THE week ahead is packed with data.
The Statistics Department is expected to announce the Industrial Production Index and manufacturing sales today and the country’s jobless rate on tomorrow.
Economists expect a slight uptick in Industrial Production Index data as activities have since picked up following the relaxation of Covid-19 movement control order.
The country’s industrial output returned to positive growth of 1.2% in July 2020 since February 2020 as compared to the same month of the previous year.
The increase in Industrial Production Index in July 2020 was due to the increment of 2.9% in the manufacturing index.
The manufacturing sector output based on year-on-year comparison increased by 2.9% in July 2020 after recording an increase of 4.7% in June 2020.
Meanwhile, the unemployment rate fell to 4.7% during the month from 4.9% in June and 5.3% in May.
IMF world economic outlook
THE International Monetary Fund (IMF)-World Bank 2020 annual meeting will take place virtually, in the US from Oct 12-18. The IMF will release its latest World Economic Outlook tomorrow.
In its June forecast, the fund said world GDP would drop by 4.9% and the virus would wipe out US$12 trillion over two years.
According to UOB, expectations are for upward revisions to the very dire GDP projections made in mid-year although the stretched fiscal positions will raise concerns that reduced stimulus could hamper the recovery.
Central bank watch
APART from Singapore, markets will also be waiting for monetary policy decisions from South Korea and Indonesia.
Bank of Korea (BoK) will announce its policy decision on Wednesday.
UOB believes BoK is done with cutting rates, having cut 75 basis points to the benchmark rate this year.
The central bank reiterated in August that it has other non-rate tools at its disposal if needed.
According to the latest Bloomberg poll, all five economists also expect no change at 0.5%.
Separately, Bank Indonesia (BI) will announce its October policy decision tomorrow.
UOB expects a 25-basis-point rate cut in the fourth quarter, possibly in October, bringing the benchmark rate to 3.75%.
BI could also opt for liquidity-supporting measures and macro-prudential policies.
According to the Bloomberg poll, all its four economists expect no change to the policy rate at 4%.
Singapore GDP in focus
SINGAPORE is expected to release its advance third-quarter (Q3) gross domestic product (GDP) on Wednesday.
The Monetary Authority of Singapore (MAS) will also be releasing its October Monetary Policy Statement on the same day.
UOB Global Economics and Markets Research, in its weekly outlook report, expects Q3 GDP to expand by 38.8% quarter-on-quarter (q-o-q) seasonally adjusted annualised rate or SAAR (-6.3% year-on-year).
This is compared with a the record plunge of -42.9% q-o-q SAAR (-13.2% y-o-y) in the second quarter.
Bloomberg poll estimates a slightly less optimistic forecast of +34.4% q-o-q SAAR, -6.7% year-on-year.
According to the median forecast of 11 economists in a Reuters poll, GDP is expected to contract 6.8% from the same period a year earlier.
The economy had shrunk 13.2% in Q2 – its worst performance on record as the country went into lockdown.
UOB said that in line with consensus expectation, its base-case assumption is for the MAS to leave policy parameters unchanged in its October meeting.
However, it do note that there is still a risk for MAS to re-centre the policy band lower, possibly in an effort for policy-making to stay ahead of the curve.
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