SGS Perspective

Singapore

    Singapore's 2Q unemployment rate (seasonally adjusted) came in at a print of 2.1%. Although unemployment roseslightly higher in 2Q (1Q was 1.9%), it is still considered low compared to recent history and the labour market remainedtight. Total employment in 2Q rose by 33,700, higher than the gains of 28,900 in the previous quarter and 31,700 in thesecond quarter of 2012. As of June 2013, total employment reached 3,420,200, which was 4.0% higher than a year ago.

    With the recent upgrade of Singapore's GDP forecast by the government to 2.5% - 3.5% (UOB's forecast remains at 3%)in 2013, the Ministry of Manpower expects the demand for labour to remain strong and as such, the tight labour marketis expected to continue with the on-going tightening of foreign manpower (from the reduction in the sub-dependencyratio in the S pass for the services sector).

    The key Singapore data this week will be the non-oil domestic exports for August which will be released onTuesday (17 Sep) and consensus is expecting a 1.9%y/y expansion, compared to the contraction of 0.7% in July.

    Electronics NODX is expected to remain weak with a 0.1%y/y decline (previous = -7.6% y/y).

    United States

    This upcoming week (16-20 Sep) is probably the most eventful week for the US in terms of monetary policy as wearrive at the eagerly awaited September FOMC decision on Wednesday, 18 September (19 Sep, Thursday 2amSingapore time). We reiterate our existing call that the Fed is likely to announce a scaling back of its QE3 purchases inits 17/18 September FOMC decision (which is accompanied by a press conference and an updated summary of theireconomic projections), but we are not certain if it will end the QE3 entirely by mid-2014 as it may depend on who takesover as the Fed Chairperson in 2014. We expect the monthly MBS purchases to be reduced by US$5bn to US$35bn whilethe monthly Treasury purchases to be reduced by US$10bn to US$35bn per month. The expectation of QE tapering tobegin in September 2013, continue into 2014 and will terminate fully in September 2014 FOMC. We expect the totalamount of QE will sum up to US$1.5trn by the time it is fully terminated. During this period of unwinding the Fed’s easymoneypolicy, we believe that that the US dollar will broadly strengthen and US Treasury yields will climb higher withthe 10-year UST expected at 3.5% by end-2014.

    The key US economic data releases this week will include the September Empire manufacturing survey (16 Sep), Augustindustrial production (16 Sep), August capacity utilization (16 Sep,), the August CPI (17 Sep), the September PhiladelphiaFed business outlook survey (19 Sep) and the August leading index (19 Sep). There will also be a series of key US housingdata include September NAHB housing market index (17 Sep), weekly MBA mortgage applications (18 Sep), Augusthousing starts (18 Sep), August housing permits (18 Sep) and the August existing homes sales (19 Sep). Other US datainclude the usual weekly initial jobless claims on Thursday (19 Sep) and 2Q current account balance (19 Sep).

    As for US Treasury auction activity this week, the US Treasury will sell the regular 3-month and 6-month bills on Monday(16 Sep), and 4-week bills and 52-week bills on Tuesday (17 Sep). The US Treasury will tap on its longer-dated bondauction market this week with a 10-year Treasury Inflation Protected Securities (TIPS) on Thursday (19 Sep). There is noFed official scheduled to speak in public events ahead of the 18 September FOMC decision.