26 March 2018
Singapore’s CPI rises, a bit

We're not too excited by this stronger than expected inflation rise - much of it looks transitory - moreover, we're axing our MAS tightening call. 

Headline CPI inflation rises to 0.4% (YoY), MAS core rises to 1.7%

Singapore's February inflation rose a bit more than expected, with the headline rate now 0.5% (was zero in Jan 2018) and the MAS (Monetary Authority of Singapore) core measure (strips out housing) rising from 1.5 to 1.7%YoY. There is no strict inflation target for Singapore, though acceptable rates would likely be in the 2-3% area. So the headline looks way off, while the core looks to be closing in on a rate that would be just about right.

Scratch below the surface, and this looks less impressive

If you take a look at narrower subcomponents of the inflation series, the overshoot of consensus looks less impressive. But most of the pick up in the YoY headline rate comes food, which is fickle, volatile and not a particularly good guide to domestic demand strength. In addition this month, there is a boost from recreation - in particular holidays. These were no doubt lifted by higher prices for holidays during the Lunar New Year. As such, this should drop back again in March as the holidays' end, so the positive contribution will become a negative one. and core and likely also headline inflation should drop back. 

As for the MAS decision in April...

So although this February CPI improvement ought to make us a little more comfortable in our forecast for a very modest tightening by the MAS stance at their April meeting, the likely transitory nature of some of this month's rises don't comfort us much at all.

Moreover, with the US-China trade war likely to deliver at least some collateral damage to the Asian region, this seems like a very good time to pull the plug on this forecast. We now look for no change at the April MAS meeting,

China: losing patience on US trade protectionism

China has sent a strong message by announcing its own tariffs following the latest US$60bn tariff plan from Washington. What are the implications?

The Ministry of Commerce of China has announced imports tariffs of 15% or 25% for a concrete list of items imported from the US. 

Nuts and fruits, wine, modified ethanol, American ginseng and steel pipes will all face a 15% import tariff. Pork related items and scrapped aluminium will face a 25% import tariff. These items' export value in total was close to US$3billion in 2017.

This reply to US trade tariffs sends a strong message to the US, even if the export value is relatively small.

Reading time around 2 minutes

Good MornING Asia - 26 March 2018

Could the $50-60bn just be the stick to encourage China to provide trade concessions?  Treasury Secretary Mnuchin dangles the carrot of a deal

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