Quoteworthy: "And soon we shall bid adieu to the twitter brand and, gradually, all the birds." –— Tweeted Elon Musk just as he announced the rebranding of Twitter to X, an “everything app” that would encompass not only social networking but also banking and shopping
Fed raises interest rates to 22-year high, leaves door open for more
The US Federal Reserve resumed raising interest rates and Chair Jerome Powell left open the possibility of further hikes, which he emphasised will depend on incoming data that has recently signalled a resilient US economy.
After pausing rate increases in June, policymakers lifted borrowing costs again at their policy meeting on July 26 for the 11th time since March 2022 to curb inflation. The quarter-percentage-point hike, a unanimous decision, boosted the target range for the Fed’s benchmark federal funds rate to 5.25% to 5.5%, the highest level in 22 years.
While Powell pointed to encouraging signs that the Fed’s rate hikes are working to curb price pressures, he reiterated that policymakers have a long way to go to return inflation to their 2% goal.
The Fed chief refused to be pinned down on when officials may hike again, citing a raft of economic reports due before the Fed’s next meeting in September, including two jobs reports, two reports on consumer-price inflation and data on employment costs.
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“All of that information is going to inform our decision as we go into that meeting,” he said. “It is certainly possible that we would raise [rates] again at the September meeting, if the data warranted. And I would also say it’s possible that we would choose to hold steady at that meeting.”
Markets took the decision in stride. As Powell spoke, stocks advanced while Treasury yields and the dollar fell.
Swaps traders held fairly steady the probability they saw of the Fed hiking rates by an additional quarter-point before year’s end. The pricing implies just slightly over 50% chance of another bump higher before the Fed tightening cycle ends.
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“The default at this point is that the Fed is going to go again — at least once more,” said Stephen Stanley, chief US economist at Santander US Capital Markets. “But the timing is open and will depend on the data. He emphasised yet again that the Fed is taking things on a meeting-by-meeting basis.”
The Fed has since early last year engaged in the most aggressive tightening campaign since the 1980s in an effort to curb inflation, which in 2022 hit a 40-year high. While policymakers paused rate hikes last month to assess the impact of previous moves, they also signalled at the time that two more increases would probably be appropriate by the end of the year. — Bloomberg
Manufacturing output down by 4.9% in June, with most clusters in the red
Singapore’s manufacturing output fell by 4.9% on a y-o-y basis in June, with most clusters in the red. Excluding biomedical manufacturing, output fell by 5.2%.
On a seasonally adjusted m-o-m basis, however, manufacturing output increased by 5%. Output increased by 6.6% m-o-m, excluding the biomedical manufacturing cluster.
The transport engineering cluster’s output rose 10.8% y-o-y, with growth in all segments. The aerospace segment expanded by 16.7% y-o-y, driven by increased demand for aircraft parts and more commercial airline maintenance, repair and overhaul jobs due to rising global air traffic.
The marine and offshore engineering segment expanded by 6.8% y-o-y due to increased production of oil and gas field equipment. Output for the biomedical manufacturing cluster fell by 1.8% y-o-y, as the medical technology segment contracted by 11.9% with lower demand for medical devices from the US and Europe. This was offset by a 9.4% y-o-y growth from the output of the pharmaceuticals segment due to a different mix of active pharmaceutical ingredients being produced compared to a year ago.
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The electronics cluster’s output declined by 2.9% y-o-y. Within the cluster, consumer electronics and computer peripherals decreased by 17.7% and 25.8% y-o-y, respectively. However, segments like electronic modules & components and semiconductors saw growth, with 7.5% and 3.1% increases, respectively.
General manufacturing output declined by 7.5% y-o-y. Printing and miscellaneous industries contracted by 14.7% and 17.2%, respectively. The drop in miscellaneous industries resulted from reduced battery production, structural metal products and wearing apparel. However, the F&B and tobacco segment experienced a slight growth of 0.3% y-o-y.
Output for the chemicals cluster fell by 8.6% y-o-y as the petroleum and specialities segments contracted 5.5% and 6%, respectively. The specialities segment fell as production of mineral oil and food additives contracted. The petrochemicals segment also fell by 14.8% due to plant maintenance shutdowns and weak market demand. The one bright spot within the cluster was the other chemicals segment which grew by 3.6%, with a higher output of fragrances. — Felicia Tan
Headline inflation falls to 4.5%, core inflation down to 4.2% in June
Singapore’s headline consumer price index (CPI) or inflation moderated to 4.5% in June on a y-o-y basis. The Monetary Authority of Singapore’s (MAS) core inflation, which excludes private transport and accommodation, eased to 4.2% on a y-o-y basis. The figures came almost in line with the forecasts from the Bloomberg consensus of 4.4% for headline inflation and 4.2% for core.
The key contributors to the easing were lower private transport costs and a slower pace of inflation for food and services. Food prices moderated to a 5.9% y-o-y growth, down from May’s 6.8%, as prices for non-cooked food and prepared meals rose slower. At the same time, steeper declines in petrol prices and a smaller increase in car prices also led to lower inflation for private transport.
Inflation for the services sector slowed by 0.3 percentage points at 3.6% in June, down from May’s 3.9%, due to the slower pace of hikes in holiday expenses and airfares. Accommodation also saw a slowdown to 4.5%, down from the previous month’s 4.7% reading, as an increase in housing rents slowed down.
On a y-o-y basis, food, recreation and culture topped the list by expenditure division with increases of 5.9% and 5.7%, respectively. On a m-o-m basis, transport rose the most at 1.7%, while clothing and footwear, communication and miscellaneous goods & services fell by 1.9%, 1.1% and 0.1%, respectively. On a m-o-m basis, headline inflation rose by 0.5% while core inflation increased by 0.2%.
In its release, MAS lowered its headline inflation estimate to average between 4.5% and 5.5%, while its core inflation estimate is pegged to average between 3.5% and 4.5%. “Excluding the transitory effects of the 1%-point increase in the GST to 8%, headline and core inflation are expected to come in at 3.5%–4.5% and 2.5%–3.5%, respectively,” says the central bank in its July 24 release.
“Upside risks remain, from fresh shocks to global commodity prices and more persistent-than-expected tightness in the domestic labour market. At the same time, there are also downside risks such as a sharper-than-projected downturn in the advanced economies which could induce a general easing of inflationary pressures,” it adds. — Felicia Tan
