As reported in Channel News Asia.
Singapore's annual inflation rate stayed at 7.5 percent in May, boosted by rising food, transport and housing costs, the government said.
The monthly consumer price index (CPI) was the same as the 7.5 percent recorded for April -- which was a 26-year high -- but lower than the 7.7 percent forecast by economists polled by Dow Jones Newswires.
Food prices rose by 9.0 percent year-on-year in May, more than the 8.5 percent in April, while housing costs jumped by 12.4 percent, against April's 11.8 percent, data from the statistics department showed.
Transport and communications costs rose by 6.0 percent last month, slower than the 7.0 percent rise for April, figures showed.
From April to May, the CPI rose by 0.2 percent, the statistics department said.
In the first five months of the year, the CPI was 7.0 percent higher compared with the same period last year, it said.
Singapore, Southeast Asia's most advanced economy, imports most of its needs because it lacks the natural resources and agricultural base of its bigger neighbours.
The trade ministry is forecasting inflation of five to six percent for the year.
Governments around the region are grappling with rising prices, particularly as the global cost of oil hovers near record levels.
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/355799/1/.html)
With inflation at all time high, and uncertainty in the global ecnomy and high oil prices, it escalate the fear of a massive onslaugh of global slowdown.
Inflation reduced spending power as people are buying lesser with the same amount of goods. This will in turn cause people to cut back on spending. With that, it may lead to further slowdown in the economy. Should major economies goes into recession, this recession are likely going to be a rather nasty one.
Monday, June 23, 2008
Monday, June 16, 2008
U.S Is Already In Recession
This article was taken from Reuters about 2 weeks ago.
Mr Warren Buffett had cited that the United States is already in a recession and it will be longer as well as deeper than many people expect.
He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.
He further said that even though the United States are in recession, he will still be investing in companies. He however doesn't believe in investing in a company just to tear it apart due to investor's financial bet, "It's not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health."
Thus, in good times, as well as bad times, there will still be good companies and industries to invest in. Keep a look out.
Governments are usually the last to announce that the country’s economy is in recession as that will cause a panic among people. With such high inflation this year, announcing a recession will cause the economy to dip further.
Mr Warren Buffett had cited that the United States is already in a recession and it will be longer as well as deeper than many people expect.
He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.
He further said that even though the United States are in recession, he will still be investing in companies. He however doesn't believe in investing in a company just to tear it apart due to investor's financial bet, "It's not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health."
Thus, in good times, as well as bad times, there will still be good companies and industries to invest in. Keep a look out.
Governments are usually the last to announce that the country’s economy is in recession as that will cause a panic among people. With such high inflation this year, announcing a recession will cause the economy to dip further.
Monday, June 2, 2008
Lessons From the U.S Credit Crisis
In the last few months, focus have shifted to rising oil price, inflation and global food shortages. The U.S Sub-prime issue is soon to be forgotten as U.S starts showing signs of bottoming out of their crisis that plague their economy since August 2007.
As per Asian Financial Crisis, 911 and SARS, lessons learnt were soon forgotten. People were indulging in big spending once again when economy is booming. Many forgotten the painful lessons and are recreating a new wave of problem for themselves.
Before we start getting all too optimistic and complacent, people needs to consider what we've learned in the past several months on how major global economies can affect us. We saw the U.S housing bubble, sub-prime, credit crisis, declining job rates, decline in spending, etc. But how did it happen? Why was its bursting so painful? Without answers, we can't hope to reduce chances of a repeat.
The bubble form due to many factors, including lenders, buyers, investors and lack of government control.
Financial Institutions
Lenders had deem property loan as safer than other underlying loans (which is true) thus they gave out aggressive loans of even up to 100%. During periods of growth, property prices will appreciate, thus 100% loan will soon appears like 90% or 80%, but soon after, when prices reaches the top of the property curve, it'll start going down (coupled with economy downturn). These loans will soon appears bigger than the value of property.
Consumers
Property buyers here in Singapore are paying between 6 to 8 times their annual household income while out in the West, people are only paying 3 to 6 times their annual household inncome. Illustration, an example average household with income of $80,000 p.a ends up buying a property surpassing the half million dollars mark (eg condo).
When jobs are in abundance, where job security are strong, people are able to stay employed and continue earning these income, but when economy weakens, where job is at stake, mortgage delinquency showed up and home owners default on payment, while home prices starts falling. They lack financial strength to hold on to their mortgage, causing a further depression of property prices as they starts to dump their property.
Speculators/Investors
Investors are there for a quick profit. Some tends to buy and sell within the shortest time, with a quick profit. Some buys to hold and rent out. Where there is a profit, there will be investors. This leads to false price inflation and when these investors pulls out, the average buyers are unable to sustain the higher price. This happened in Singapore, became prominent between July to November 2007.
Government
Government being the regulators of the modern capitalist system allows them to act as a watchdog and provide guardrails to keep markets from driving the economy off a cliff. The regulators failed terribly. Was it complacent or poor foresight to blame? Intervention by regulating bodies are often too late. It is like, till death do they realise. Suicidal systems without watchful eyes to plug the plunge often results in crippling economy.
Regulators should be there to protect unsophisticated consumers by restricting their purchases with policies. The current property purchase policy in Singapore is great, where buyers are required to pay 20% downpayment, being 5% Cash, 15% CPF (Provident funds). Financial institutions are reluctant to provide 90% Loan to Valuation.
As I have mentioned several times in different post, Singapore's 'sup-prime' are in the making with the lack of control and poor policy in the automobil sector. Car value dips the moment the car is secured by buyers yet loans are provided for up to 100% of the car value, (quite often, MORE than the value of car value with the cash rebates).
Yes, car loans appears negligible to individuals. What is a $50,000 loan to the average car owner earning $40,000 p.a? This works out to only $520 per month on a Gross salary of $3,330. What about running cost, that takes up another $600-700 per month? What about the borrower's other financial commitments? A balloning problem I say.
If the regulators in Singapore doesn't do something about this loophole soon, I would think it may lead to our credit bubble in time to come.
Collaterals should only be a backstop, where value of collaterals are higher than the mortgage, and where economy appears sound. Regulators shouldn't neglect the potential pitfall where collaterals are lesser than the loan.
On the property regulation, has the government forced property buyers to the grave of a credit constrain? I would think so. Income ceiling has made it hard for some families to purchase public housing. (refer to http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=2388609&isCFP=&FolderID=27928&ProjectId=7597756&reAskpage=answer%2Easp&SelectedCategory=&RecordQuestion=)
Last word of advise as usual, we better take care of ourselves than rely on 'parental help'.
As per Asian Financial Crisis, 911 and SARS, lessons learnt were soon forgotten. People were indulging in big spending once again when economy is booming. Many forgotten the painful lessons and are recreating a new wave of problem for themselves.
Before we start getting all too optimistic and complacent, people needs to consider what we've learned in the past several months on how major global economies can affect us. We saw the U.S housing bubble, sub-prime, credit crisis, declining job rates, decline in spending, etc. But how did it happen? Why was its bursting so painful? Without answers, we can't hope to reduce chances of a repeat.
The bubble form due to many factors, including lenders, buyers, investors and lack of government control.
Financial Institutions
Lenders had deem property loan as safer than other underlying loans (which is true) thus they gave out aggressive loans of even up to 100%. During periods of growth, property prices will appreciate, thus 100% loan will soon appears like 90% or 80%, but soon after, when prices reaches the top of the property curve, it'll start going down (coupled with economy downturn). These loans will soon appears bigger than the value of property.
Consumers
Property buyers here in Singapore are paying between 6 to 8 times their annual household income while out in the West, people are only paying 3 to 6 times their annual household inncome. Illustration, an example average household with income of $80,000 p.a ends up buying a property surpassing the half million dollars mark (eg condo).
When jobs are in abundance, where job security are strong, people are able to stay employed and continue earning these income, but when economy weakens, where job is at stake, mortgage delinquency showed up and home owners default on payment, while home prices starts falling. They lack financial strength to hold on to their mortgage, causing a further depression of property prices as they starts to dump their property.
Speculators/Investors
Investors are there for a quick profit. Some tends to buy and sell within the shortest time, with a quick profit. Some buys to hold and rent out. Where there is a profit, there will be investors. This leads to false price inflation and when these investors pulls out, the average buyers are unable to sustain the higher price. This happened in Singapore, became prominent between July to November 2007.
Government
Government being the regulators of the modern capitalist system allows them to act as a watchdog and provide guardrails to keep markets from driving the economy off a cliff. The regulators failed terribly. Was it complacent or poor foresight to blame? Intervention by regulating bodies are often too late. It is like, till death do they realise. Suicidal systems without watchful eyes to plug the plunge often results in crippling economy.
Regulators should be there to protect unsophisticated consumers by restricting their purchases with policies. The current property purchase policy in Singapore is great, where buyers are required to pay 20% downpayment, being 5% Cash, 15% CPF (Provident funds). Financial institutions are reluctant to provide 90% Loan to Valuation.
As I have mentioned several times in different post, Singapore's 'sup-prime' are in the making with the lack of control and poor policy in the automobil sector. Car value dips the moment the car is secured by buyers yet loans are provided for up to 100% of the car value, (quite often, MORE than the value of car value with the cash rebates).
Yes, car loans appears negligible to individuals. What is a $50,000 loan to the average car owner earning $40,000 p.a? This works out to only $520 per month on a Gross salary of $3,330. What about running cost, that takes up another $600-700 per month? What about the borrower's other financial commitments? A balloning problem I say.
If the regulators in Singapore doesn't do something about this loophole soon, I would think it may lead to our credit bubble in time to come.
Collaterals should only be a backstop, where value of collaterals are higher than the mortgage, and where economy appears sound. Regulators shouldn't neglect the potential pitfall where collaterals are lesser than the loan.
On the property regulation, has the government forced property buyers to the grave of a credit constrain? I would think so. Income ceiling has made it hard for some families to purchase public housing. (refer to http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=2388609&isCFP=&FolderID=27928&ProjectId=7597756&reAskpage=answer%2Easp&SelectedCategory=&RecordQuestion=)
Last word of advise as usual, we better take care of ourselves than rely on 'parental help'.
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