Last Week in Numbers: Fed Keeps Interest Rate Steady

On Wednesday, the Federal Reserve kept interest rates unchanged at between 1% and 1.25%. This was in light of the preferred inflation measure sitting at 1.3% and United States Economic growth of 3% for the third quarter.

The Fed also said that the planned reduction of its US$4.5 trillion (S$6.1 trillion) balance sheet started in October and is ongoing.

Meanwhile, China’s manufacturing sector growth decelerated in October. The official Purchasing Managers’ Index (PMI) fell to 51.6, from 52.4 in September. A reading above 50 indicates growth. At the same time, the official non-manufacturing PMI fell to 54.3 from 55.4 in September.

The overall economy grew at 6.9% over the first nine months of the year. Profits for China’s industrial powerhouses grew 27.7% in September, the largest in six years.

Bank of Japan kept its policy unchanged. Japan’s industrial output fell by 1.1%. The fall was the most in four months but less than expected. Japan’s jobless rate remained at 2.8% in September, while core consumer prices rose 0.7% in September on an annual basis.

In Singapore, bank lending grew for the 12th month in a row in September. Total lending last month was S$640.68 billion, 6.2% up from the same time last year. On a monthly basis, bank loans rose 1% from $634.41 billion in August.

Growth was mainly due to lending to financial firms, which expanded by 15% year-on-year, and to general commerce firms, which grew 16.4% year-on-year. Loans to manufacturers grew by 11.1% while those to transport, storage, and communications firms increased by 10.8%. Consumer borrowing rose 3.6% in September on an annual basis to S$257.4 billion.

According to economists, companies are spending more money on capital expenditure (capex). They reported a growth of capex at around 8% per year. For instance, companies in the Russell 2000 index spent 33% more on capital expenditure this year.

Japan’s core machinery orders, an indicator for future capex, rose in both July and August. While in the Euro area, a September survey of 600 companies found that capex is set to increase for the first time in 2 years.

Finally, Singapore’s economy is expected to grow 2-3% this year, and slightly lower next year. Singapore’s economy had grown an average of 4.4% on a quarterly basis during the second and third quarters of this year.

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