Keep an eye on the labour market even as GDP numbers are looking up
Domestic unit labour costs are expected to rise more gradually as nominal wage growth moderates
OCTOBER is usually a busy month with a raft of financial and economic data published by the various agencies. The data ranges from the usual monthly releases to quarterly reports, such as the state of the property market to the performance of the economy, in terms of gross domestic product numbers.
There is the regular monetary policy meeting, which provides a view of inflation and the direction of the Singapore dollar. October also sees third-quarter financial numbers being released by listed companies, which provides another aspect of how the economy and businesses are faring.
Monday’s (Oct 14) releases sound a note of optimism for the economy, with the key GDP release showing a 4.1 per cent year-on-year growth for Q3 while monetary policy settings remain unchanged.
The growth number is significantly higher than the 2.9 per cent recorded in the previous quarter. Growth was bolstered mainly by manufacturing, which grew at a clip of 7.5 per cent compared to a year ago. With an upswing in the electronics cycle and an easing in global financial conditions, the Monetary Authority of Singapore (MAS) now tips full-year economic growth to come in at the upper end of the 2 to 3 per cent forecast range.
On the inflation front, the outlook also looks positive. Core inflation has eased and is anticipated to decline further to around 2 per cent by the end of 2024. The inflation outlook risk was cited in the MAS statement as being more balanced compared to three months ago, indicating less of a concern about inflation, according to OCBC’s chief economist and head of global markets research and strategy, Selena Ling.
Next year’s core inflation forecast of 1.5 to 2.5 per cent will be lower than this year’s 2.5 to 3 per cent, in yet another positive indicator for the economy.
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While these are favourable signs, the labour market bears watching closely. One of the reasons why inflation is easing is that domestic unit labour costs are expected to rise more gradually as nominal wage growth moderates.
In Singapore as well as overseas, large and small companies are restructuring their business models to be better prepared for challenges such as climate change, artificial intelligence or technological obsolescence.
Take tech firm Dyson, which conducted layoffs in Singapore recently. The news came some three months after the company said its Singapore global headquarters was “not directly impacted” by a restructuring to let some 1,000 jobs go in Britain.
Job cuts have also been happening at Samsung Electronics Singapore, which is conducting “routine workforce adjustments to improve operational efficiency”. It is not just Singapore which is affected, with the maker of smartphones, TVs and memory chips slashing sales, marketing and administrative staff worldwide, according to reports.
It is also not just the large firms, with the latest annual survey by the Singapore Chinese Chamber of Commerce and Industry pointing to ongoing concerns such as rising business costs, manpower shortages and the need for transformation among small and medium-sized enterprises.
Even as the economic numbers remain stable or improve, the need to transform business models will see many companies undergo restructuring. The longer-term impact on the job market will be an important one to watch.
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