Jun 16, 2009

The Many Faces of the Economy

Is the economy doing badly or not? If you flip through the newspapers and try to find the answer, you're likely to feel confused. Today, for example, the Straits Times tells you that retail sales "plunged" in April:
ST June 16, 2009
Retail sales plunge in April
Biggest drop in 10 years due to lower sales of big-ticket items like cars
By Gabriel Chen

RETAIL sales in April plunged the most in a decade as the economic crisis crunched consumer spending on items such as motor vehicles and computers.

There were some bright spots in the new numbers - jewellery, watches and other small-ticket items held up - but the overall picture was one of gathering gloom in the retail sector as unemployment rose and confidence sank.

The retail sales index slumped 11.7 per cent from a year ago, its worst showing since a 12.7 per cent fall in January 1999.
But today, the Straits Times also reports that Singaporeans are spending big in the Great Singapore Sale, even bigger than they did one year ago at this time:
June 16, 2009
Recession, what recession?
Singaporeans are spending big in this year's GSS.
By Reico Wong

SINGAPOREANS are spending big bucks at this year's Great Singapore Sale.

According to credit card figures released by MasterCard on Tuesday, the first GSS weekend saw Singapore cardholders chalking up bills of US$26.3 million (S$38.3 million) - an increase of seven per cent from the same period last year.

Locals were also swiping their credit cards more furiously, with the number of transactions they made in the first weekend rising 15 per cent from last year to 283,703 this year.
Meanwhile the real estate experts keep insisting that the property market cannot be doing well. In fact, they have been saying this for at least the past nine or ten months. See this article from Saturday's Straits Times:
ST June 13, 2009
Property market warning
Analysts point to over-supply and weak rental demand
By Joyce Teo

THE optimism in Singapore's property market is unsustainable, given an impending over-supply of new flats, weak rental demand and the fact that the country remains in a recession.

That is the pessimistic view of two research houses, which concluded that the price recovery is highly fragile.

Citigroup said the market is not at the start of a cyclical upswing and that the spike in home prices cannot last. 'We caution against over-optimism, because fundamentally the market is not ready for a sustained price recovery,' analyst Wendy Koh wrote in a report on Thursday.

In the same report, she downgraded Allgreen to 'sell', putting the developer in the same 'sell' basket as City Developments, CapitaLand and Keppel Land. Citi also downgraded Wing Tai to 'hold'.

While there has been strong resale demand, the call for new homes is patchy and rental demand remains weak, Ms Koh said.
But two days later, we see that contrary to what Ms Koh had said, the call for new homes is not very patchy at all. In fact, the sales figures in May 2009 were almost as high as the all-time high in Singapore's history (August 2007):

ST June 15, 2009
Merry May for home sales
By Joyce Teo

SALES of new private homes rocketed to an 'outstanding level' last month thanks to price cuts and the share market rally boosting buyer confidence.

Recession-defying numbers out on Monday showed there were 1,668 units sold in May, just a tad below the all-time high of 1,731 set in the boomtime month of August 2007.

Sales were also well ahead of the already-strong developer sales of 1,214 units in April and 1,220 in March.

This has encouraged 'many speculators' who were sitting on the fence to take action and strike while the iron is hot, taking advantage of the low prices in the market across all levels, he said.

Other experts cited pent-up demand and buyers' fear of missing the boat as other factors behind the high sales.

Developers lifted a gear last month as well, launching 1,161 new homes, up from 1,085 in April, according to Urban Redevelopment Authority data.

We learn that the job market was very poor in the first three months of the year:
ST June 16, 2009
Q1 job market dismal
Net loss of 6,200 jobs; workers are taking longer to find new jobs
By Aaron Low

THE latest quarterly labour market data paint as dismal a picture since Sars hit Singapore six years ago.

In the first three months of this year, there was a net loss of 6,200 jobs - far worse than the 1,000 estimated at end-April by the Ministry of Manpower (MOM).

Earnings also fell, unemployment rose and people took a longer time to get another job, said MOM yesterday when it released the finalised job market figures for the January to March period.
But you would never have guessed this, if you had visited the PC Show at Suntec City last weekend:
ST June 15, 2009
PC Show crowds surge
By Chua Hian Hou

THE four-day PC Show pulled in a record 1.13 million visitors, as Singapore's consumer confidence surged in the wake of news of 'green shoots', that the global economic crisis might have bottomed out and could be on the mend.

Last year, before the economy began its plunge, 1.1 million people visited the event, Singapore's longest-running consumer technology event.

Consumer spending at the show could even surpass last year's take of $51.7 million. As at 6pm last night, three hours before the close of the show, exhibitors had reported receipts of more than $48 million.

PC Show organiser Lines Exposition and Management Services project manager Gillian Loh said that she was confident 'we can top last year's figure'.
So dear readers, what's your take?


WhatsTheNumber said...

Demand statistics of housing and retail sales include foreigners (tourists) and foreign workers.

Job loss statistics from MOM probably include mostly Singapore citizens and PRs.

Most of my foreign friends have relocated away from Singapore. They do not see sustainable growth or rapid recovery here. The ones who stay are often those whose English "can't-make-it".

Anonymous said...

I am not sure if I heard it correctly over the CH8 news last night that the labour market has shrunk for the 1st time in six years. If so, what happened to the 1+ million population growth over the same period? Who is feeding them?

Anonymous said...

There's a trend in the reports you cite, the pessimistic reports are broader, statistical in nature, while the optimistic ones are more anecdotal. But I guess this still does not answer the question of which is the reality...

yh said...

I think the retail sales plunge should be more indicative of the health of the economy. Could higher credit card figures reflect the purchasing power of consumers? People can no longer afford their purchase like they used to? More price conscious people looking for bargains at PC show?

The increase in condo sale may be due to HDB upgraders taking advantage of the narrowing price gap between top range HDB flats and condos. They are less concern about any eventual slump as the price of their hdb will go the same way anyway.

Our economy will recover when the US economy recovers. Can americans return to their pre-crisis level of consumption? I doubt it.

Of course no one can predict how the world economy will respond to the measures taken by various governments. Every crisis in the past looked certain to doom us to decades of economic misery. But they never did.

hugewhaleshark said...

Hehe. Confusing indeed, Mr Wang. A few of my conclusions…

1. For Singapore residents (I’ll call everyone Singaporeans for simplicity) who have lost their jobs or have had their pay cut, times are tough, obviously. Unemployment is up for sure. But by numbers, most Singaporeans have not lost their jobs, and may have suffered no worse than a reduced bonus. I am in this camp, as are most of my colleagues. Government policy e.g. the Jobs Credit Scheme and easy monetary policy probably helped.

2. There are many Singaporeans who are cashed up over the last few good years, and have stayed away from the property market. These people are looking to buy, now that prices have come off quite a bit. Mr Wang is in this group. Low interest rates are helping, not only those buying, but also those holding on to earlier purchases. There is little distress from not being able to service mortgages.

3. Retail spending did fall in April, but they could have recovered by the time the GSS started. People can still spend, and are looking to spend (probably fed up of stinging over the last year or so), but only when deals are good. The reduced spending over the first part of the year is being released all of a sudden over the GSS.

Makes sense???

Chee Wai Lee said...

These statistics all appear to point to a loss of individual liquidity (at best) or (more likely) increased household debt.

Let us see how much bigger speculators can push Singapore's housing bubble. Does anyone have statistics on housing supply in Singapore? The way I see it, demand = population + speculation factors. With information about supply, it might be possible to figure out just how strong the speculation factors are (or just how undesirable certain aspects of supply are).

Anonymous said...

I think the ST tiltes are not set by the article writer: I noticed the "Merry May for home sales" has a much darker tone in the text

KAM said...

Well you see, some of the ST journalists surf the internet, some have high income, some write rubbish, some are idealists, and some are ....the list goes on.

Opinions...now all the writers in this world, online or offline, seem to only write opinions and views. Not facts.

Anyway facts are also be twisted in any direction.
So be careful what you wish for, a freer press. Then monkeys start to appear on the newspapers.

Anonymous said...

Perhaps my sense of economics is not that good but shouldn't one be worried if credit card spending is up? It could mean two things. One is that the economy is getting better and people are spending more because they have more. The second is that people want to keep up appearances and spend on credit first, think of payment later.

Perhaps if the news reveal the bad debt rate or ppl defaulting on payments for property as well then one can make a better judgeent.


Pkchukiss said...

Don't you think that it's too much of a coincidence? By reporting on the extreme ends of the spectrum, they can lay claim to having accurate reports.

hugewhaleshark said...

There’s no mystery in the housing supply data… surf the URA website and it’s all there. Unsold units with sale prerequisites was about 14k as at 1Q09 (there may be a newer 2Q number - probably less given strong sales recently). In recent years Singapore has sold an average of 8k units a year, so the supply is not really very scary. 07 was very high (15k off the top of my head) and 08 was very low (4k only). Further up the pipeline, unsold units with planning approval is a bit over 40k. Unsold unit numbers have actually fallen if you look at long data over the last 10+ years. Even deeper into the pipeline, there are considerable numbers of en-bloced developments which have yet to enter the supply data (no planning approval yet), but by past experience these can be held back for many years.

tkl said...

The reports are like snapshots of narrow phenomena within bigger structural changes, with numbers measured using existing methods that does not capture the wider, more complex situation.

Most of the retrenched are likely foreigners (from expat to workers), as are many who are now investing in properties here (from Indonesian to Middle Easterners).

These trans-national movements and transactions are not captured well in old survey/measurement methods that presume a relatively stable population of predominantly citizens or PRs. eg, the percentage of retrenched counted against total workforce will differ greatly if you exclude foreigners.

yamizi said...

Some of my colleagues still planning for overseas holidays. Some just came back. Got recession meh? =P

Who are the ones that are really affected in Singapore by this recession, if there is one?

ErniesUrn said...

After they won 2 awards. The report credibility pluges. Not surprised. They also adopt the same appraoch with GIC and Temesek Holdngs. Buy high sell low.

蝴蝶思语 said...

My guess is that the press tries to keep a balance by reporting both positives and negatives, so that they can position themselves as being neutral and avoid any criticisms for creating either false hopes or panic. Hmm, so what's the acceptable role of the press?

Onlooker said...

Playing with "official" news to hide the fact that this recession is really bad and it is only going to get worst soon.The job pool is almost dried up and the reverse migration is masked to prevent a massive drop in housing "demand" the lifeblood of a certain group of people.

Even with all those infrastructure building they still can not remedy the current crunch without cutting off their addiction to cheap labours.

James said...

The real recession will occur slowly over the next few years when less american and european expat and business come here to work invest when the tax reforms is implemented

dieaready said...

High consumer spending, loss of jobs, means that overall savings goes down. People are spending as they listen to the media saying that the worst is over, and things will get better, and now there are good offers as businesses try to get rid of stock. But things are not getting better. The US will be going into hyperinflation at the rate they are going, my guess is within a year or 2, which would, needless to say, have a massive effect on the global economy.

Now, there are a few ways real wealth is generated. It is generated through agriculture and mining, and is added when the raw products undergo manufacturing. Now, the financial sector on the other hand, multiplies the current real wealth, creating seemingly much more wealth out of no where. What happens when the real wealth disappears?, as in this depression? The financial sector no longer will have the real wealth to multiply, so all the 'wealth' in circulation disappears.

Take a look at Singapore. It has no sources of real wealth. It is mainly a financial sector. Guess what is going to happen? The only way the financial sector can go on is if they start creating 'wealth' through the printing/issuing of money, and that path leads into hyperinflation.

Government spending, while sounding nice to the economy, that it will help the economy get back in shape, is not much of an option either. Germany when it underwent hyperinflation had government spending at a sizable fraction of all economic activity, and it didn't help them. The government is inefficient, and it doesn't generate any real wealth, so in other words, it spends so much, which stimulates the economy by a bit, and they get back taxes which is a whole lot less, which means that if the cycle continues on, it will bankrupt the country. Take a look at the US.

Listen to the doom and gloomers. They have been predicting this for a long time, so now that it has happened, they would know much more than the 'financial experts' who never thought about it. One good point to note is the massive derivative bubble that is going to burst soon, in the order of around 500 to 900 TRILLION USD. Good luck.

LuckySingaporean said...

Simple. They are all guessing. Nobody really knows because we have not been here before.

What is clear is we will not get back to where we were in 2006/2007. It is between slow growth and prolonged recession....now that the 'crisis' portion is over. We will keep getting mixed signals...confusing like a drunken man stumbling out of a bar...you can be sure which direction he is headed until you observe him long enough.

Mr Wang Says So said...


No wonder the property market is up. The best hedge against inflation is property. :D

dieaready said...

Actually, property is one of the worst things to go into just before hyperinflation. No one will have the money to buy houses, as savings will be made worthless, and all money made on the day will be spent on the day during hyperinflation. Sometimes even by the hour.

The best bet against hyperinflation is gold, silver and commodities. Watch the gold and silver markets, gold is predicted to hit around 1.5 to 3k and silver around 50 to 150 per ounce. Of course, it is better to buy physical gold and silver, as I have heard of reports about 'virtual' gold/silver companies that they practice something similar to the fractional banking of banks.

And the crisis portion is not over yet. Think of this crisis as a series of waterfalls. I saw several charts comparing this depression to the Great Depression, and some of them indicated that this drop is steeper than the Great Depression. There are a few more 'bubbles' that are going to burst in the next few years.

Mr Wang Says So said...

Right ... That's why you'd rather have a house, than a big stack of useless money.

cansgsurvive said...

I wonder can this small little island, esp when her "allies - the major powers" cant even stand straight.

The best bet is the merge with hinterland and cry out loud of this "difficult" decision.

Anonymous said...

A house is almost as useless as cash, jewellery and gold bars in hyper-inflation environment.

Food, weapons, water and energy are the real winners.

Anonymous said...

there are lies, damn lies, and then there are statistics.. see today's ST comparing temasek's performance with rest of the world.. y they still need to harp on this huh? wanna brainwash us ah?? HAHHAHA... its a piece of research worthy of a nobel prize!!! LOL!!!!

dieaready said...

Yup, but after that comes gold and silver for trading. Pity in Singapore we can't get weapons.

Abao said...

Hmm, actually the economy isnt doing that well. I'll just use the PC Show as an example. The crowds were nowhere near the previous years in the first place, Sony wasn't even there and the whole of level 6 was mostly singnet, starhub and m1 trying to get more subscribers onto their network, instead of the usually huge congregation of SME's from SLS... Most were there to look instead of buying (me included), and I left the place disappointed.

Parka said...

Just because people can't see the recession doesn't mean there's no recession. If indeed Orchard road is devoid of shoppers, I think no one should be in Singapore already.

Friends who I spoke to who are somewhat related to the import and export trading have all claimed that containers and activity are down. So the question is, who does these affect? People directly in this line or (as we cannot see) people shopping on Orchard road.

So if you have a job, you're lucky. You don't see people with no money out shopping because they don't.

Anonymous said...

Orchard road seems crowded as the the 5% of Singapore population not affected by the recession congregate there to shop. The other 95% still stays home.


Anonymous said...

I think when you get a miture of positive and negative news, it probably means that the bottoming out process has begun.

When you start getting more good news compared to bad, then the recoery has started.

dieaready said...

Check the facts first, before claiming 'green shoots'. Ignore stocks, as those are based on speculation. Look at things like international trade, job market, employment, etc. Ignore China's massive purchases of commodities as it is just merely dumping the dollar quietly. Take a good look at US spending by printing money to create jobs that each costs nearly a million or more (latest is the auto-industry - 2 billion USD to create 2300 jobs). Now ask yourself if the 'green shoots' are real.