In today’s briefing:
- Singapore: Multiple Catalysts; Upside Surprise to 2022 Growth Likely
- US: Tight Labour Market and Still-Abundant M2 Make for an Inflationary Cocktail
Singapore: Multiple Catalysts; Upside Surprise to 2022 Growth Likely
- The economy is primed for robust growth this year on buoyant global demand, “catch-up” growth in pandemic-impacted sectors, strong household balance sheets, and further upside in the private investment recovery.
- Consensus growth forecasts for 2022, currently tracking at 4%, are probably too conservative given this sanguine outlook.
- We forecast GDP growth at 5.0-5.5%; the output gap will turn positive earlier than policymakers envisaged (~mid-2022). Inflation will remain firm, compelling MAS to tighten policy aggressively in April, October.
US: Tight Labour Market and Still-Abundant M2 Make for an Inflationary Cocktail
- CPI inflation (7%YoY) is at its highest since the Volcker era (June 1982), core CPI inflation (5.5%YoY) its highest since February 1991, driven by 12-14%YoY growth in M2 during 2H21.
- The ‘disappointing’ NFP still brought the unemployment rate down to 3.9% in December 2021, well below the NAIRU, resulting in a 4.7%YoY rise average hourly earnings (wages).
- We expect at least 4 hikes in the Fed Funds rate this year, taking it to 1.25% by end-year, with QE4 likely abandoned at the Jan25-26 FOMC meeting.
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