Markets Insights

Economic growth estimates may lift STI

Strong third-quarter numbers, from 3.5% to over 5%, predicted for data due out on Friday

Renewed cheer over the local property market helped lift the Straits Times Index (STI) to a strong finish last week. This week, solid economic numbers might do the trick.

A rebound by the Big Three banks and a property-stock rally helped local shares end on a positive note last Friday, ending at 3,291.29, up 2.2 per cent for the week.

The trigger was last Monday's flash estimates from the Urban Redevelopment Authority. It showed a rebound in the private residential property price index in the third quarter, for the first time in four years - a sign that property bulls have seized on as evidence that the property bear market is over.

This week, attention will likely turn to Friday's release of Singapore's advance economic growth estimates for the third quarter from the Ministry of Trade and Industry.

Private-sector economists have forecast a strong set of numbers - their estimates range from about 3.5 per cent to slightly above 5 per cent year on year for the quarter.

This would be a strong lift from the second quarter's 2.9 per cent expansion and the fastest quarterly expansion since 2014.

Wall Street meanwhile provided a weak lead for the week ahead, closing lower last Friday as energy shares dropped sharply and added to the dour mood set by the first decline in US non-farm jobs in seven years. The United States Labour Department's employment report showed that non-farm payrolls fell by 33,000 last month as hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring.

Nonetheless, average wages rose 0.5 per cent, compared with a 0.3 per cent increase estimated by economists polled by Thomson Reuters.

Research analyst Lukman Otunuga at foreign exchange broker FXTM told Agence France-Presse that the drop in job numbers would usually be enough to set analysts worrying about the health of the economy, but the wage gains raised hopes of a needed boost to inflation.

"The 0.5 per cent month-on-month rise in hourly wages played a leading role in the US dollar's sharp appreciation... With the unemployment rate hitting its lowest level since 2001 at 4.2 per cent, the overall report was encouraging and should support expectations of higher US interest rates."

The US Federal Reserve has been watching for signs of rising wages, which may push inflation closer to its goal of 2 per cent.

The central bank last month said it will likely raise interest rates again by the end of the year.

It will be releasing the minutes of its last Federal Open Market Committee (FOMC) meeting. The FOMC is the branch of the Fed that determines the direction of monetary policy.

United Overseas Bank economists noted in a report that it will be a busy week for US data, with housing figures, advance retail sales and last month's consumer price index all set for release. There will also be plenty of news on the corporate front, as the US earnings season is back, with the early focus likely to be on the major banks.

A version of this article appeared in the print edition of The Straits Times on October 09, 2017, with the headline 'Economic growth estimates may lift STI'. Print Edition | Subscribe