U.K: U. K’s Unemployment rate came unexpected at 3.6% from a 3.5% Forecast

Forex

Summary:

The British economy showed some strength versus the U.S Dollar after releasing the U.K Unemployment rate data on 15-11-2022 at 11 AM (GMT +4) with an unexpected result of 3.6%. GBPUSD increased from 1.1789 to 1.1880, but is this increase because of the unemployment rate?

Fundamentals

The U.K released the Unemployment Rate report on November 15, 2022. The Unemployment rate is one of the major indicators that affect the market widely, it measures the percentage of the total work force that is unemployed and actively seeking employment during the previous three months. A higher-than-expected data is bearish for the Pound, and lower-than-expected data is bullish for the Pound. The data came out to be 3.6% rather than the forecasted result of 3.5% which is supposedly bullish for the Pound. However, GBPUSD increased widely after this indicator but not because of the employment rate, it is because of the dollar index dropping sharply thus increasing major currencies Vs the USD. Bulls interfered, and the U.K economy showed some growth where GBPUSD increased from 1.1789 to 1.1880.

Gold increased sharply to touch the $1785 an Ounce level before dropping back to $1774 level.

Major traders are holding their Gold positions for further price increases.

Technical Analysis

GBPUSD Daily Chart

U.K: U. K’s Unemployment rate came unexpected at 3.6% from a 3.5% Forecast _1

The daily GBPUSD pattern shows a bullish engulfing with possible prices touching the 1.1900 level.

Support and resistance:

1.1858

1.1843

1.1831

Pivot: 1.1870

1.1912

1.1897

1.1885

Trading Recommendations

High Probability Scenario:

Long Above: 1.17880

Resistance TP1: 1.18107

Resistance TP2: 1.18350

Alternative Scenario:

Short Below: 1.17355

Support TP1: 1.17096

Support TP2: 1.16830

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Owen Li

Political

If every picture tells a story, then images from the Cop27 conference, of a British prime minister and a French president getting along quite well, deserve a chapter of their own.

Rishi Sunak, proudly the first person of Asian origin to rise to Britain's highest political office, is showing even those opposed to his views that he can be a statesman of dignity.

While he has already made some mistakes in a premiership only a few weeks old, it is to his credit that courtesy and professionalism seem to come naturally. And that extends to his early dealings with potentially troublesome figures.

Mr. Sunak's predecessors made a viable working relationship between France and the UK nigh on impossible. A series of eminently avoidable disputes might almost have been concocted to appease nationalistic elements of the ruling Conservative party.

But the warm hug and back-slapping between prime minister and president at the Sharm El Sheikh climate change summit offered modest hope that the entente cordiale, signed in 1904 to improve cross-Channel relations, might be back in safe hands.

Grown-up observers note the contrast with Boris Johnson, whose approach to France veered between gauche chumminess and blustering belligerence, complete with schoolboyish "donnez-moi un break" jokes. Mr. Sunak is also unlikely to be caught declaring, as Liz Truss did when campaigning to succeed Mr. Johnson, that the "jury's out" on whether Mr. Macron is friend or foe.

As happens rather a lot in Ms. Truss's political life, she had radical second thoughts, insisting after becoming prime minister that he was a friend after all. That she had considered it tactically useful to doubt Mr. Macron's intentions gives a telling insight into modern Conservatism's French-bashing instincts. Cursory scrutiny of Anglo-French history reveals ample evidence of wholly uncordial sentiment. Periodic warfare can be traced back to the 12th century; the so-called 100 Years' War in fact lasted for 116, between 1337 and 1453.

Allies in both the 1914-18 and 1939-45 world wars, and in other important international crises, the two nations have nevertheless managed to find endless grounds for bitter discord. Brexit has generated a new breed of contentious issues, including fishing rights, immigration, Channel transport and the Northern Ireland border; there has been non-Brexit friction over Covid-19 controls and a submarine deal with Australia. Their legacy complicates Mr. Sunak's search for more constructive ties.

The two leaders do have plenty in common. Both are meritocrats. Three of their parents were doctors (Mr. Sunak's mother was a pharmacist). Roughly the same age – Mr. Sunak, 42, Mr. Macron two years older – they worked successfully in investment banking before turning to politics. The photos from Cop27 suggest the same sleek dress sense. And despite Mr. Macron's spell as economics minister in the failed socialist government of Francois Hollande, and his later attachment to centrism, his developing philosophy broadly resembles the moderate right-wing approach of Mr. Sunak.

Where, glaringly, they disagree is on Europe. Mr. Macron is passionately pro-EU whereas Mr. Sunak equally firmly supported Britain's withdrawal. In the face of powerful evidence that Brexit is economically as well as socially damaging, he still talks of "embracing its opportunities".

Mr. Sunak cannot be unaware of the undercurrent of kneejerk Francophobia that flows through his party from grass roots to parliament. There have been post-Brexit faults on both sides but populist British antagonism towards France defines much of the discontent.

Mr. Sunak began his premiership with weakened authority. Dissenting forces blithely overlooked the multiple deficiencies, and cavalier relationship with the truth, that led Mr. Johnson to resign in disgrace; they wanted him back because they felt only his undoubted appeal to many voters could save the Tories from humiliating defeat at the next general election.

It would be fanciful, however, to suggest the new prime minister's probleMs. have been aggravated by his curious decision to make Suella Braverman, another Tory high flyer of Asian pedigree, his home secretary. Only a week earlier, Ms. Braverman admitted procedural irregularities serious enough to warrant resignation from the same role in the dying days of the short-lived Truss government.

Left and liberal opinion sees Ms. Braverman as the beneficiary of a "grubby deal" with Mr. Sunak, a hypocrite peddling hardline anti-migrant policies even though she is the daughter of Indian parents who emigrated to Britain from Kenya and Mauritius. She also benefitted handsomely from the Erasmus student exchange programme before ardently supporting a rigid Brexit that denied it to others, Erasmus replaced by a cut-price British scheme.

Yet, it is precisely the "tough on immigration"stance, and unflinching endorsement of Brexit, that endears her to much of the Tory faithful.

Mr. Sunak was on trickier ground with his initial defence of another cabinet member, Gavin Williamson, after disturbing allegations emerged of verbal abuse of colleagues. Aspects of this questionable conduct were known to the prime minister before he recalled a man who had twice been dismissed from government in the past. Inevitably, Mr. Williamson has now resigned but Mr. Sunak's judgement was called sharply into question by an appointment at odds with the high-minded pledge that his administration would honour "integrity, professionalism and accountability". He was also accused of making a "screeching U-turn" by belatedly agreeing to attend Cop27 after first saying he was too busy at home.

In truth, tougher challenges lie immediately ahead than the need to soothe relations with France. The decisions Mr. Sunak and Chancellor of the Exchequer Jeremy Hunt must make to shore up an economy battered by global factors but also Brexit and Ms. Truss's calamitous dash for growth, may deepen the cost-of-living crisis for millions of households.

Anglo-French rapprochement remains a desirable goal all the same. Far beyond British corridors of power, there will be keen interest in whether the renewed spirit of friendship is genuine, not just the empty product of a conference photo opportunity. A deal on Monday to tackle the Channel migrant crisis, as pressure grows on the UK's immigration system, raises some hope that it could be the former.

To add to shared strategic interests, close geographical proximity and sheer common sense, there is two-way admiration for each nation's social, cultural and sporting virtues. Mr. Macron reputedly described Mr. Johnson as a "clown" and it is possible he saw Ms. Truss, if feeling polite, as naive; he is also politically savvy enough to recognise their qualities.

A former French president, Jacques Chirac, likened relations between London and Paris to a "turbulent love affair". The duty of Mr. Macron and Mr. Sunak is to show that even volatile co-habitation can work if founded on mutual, enduring respect.

Source: The National News

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Devin

Economic

As the charts climbed higher on their data terminals, bond market investors watching the shift felt increasingly sick.

The impact of that fateful day in September when Trussonomics was launched on an unsuspecting public with the mini-budget was huge, and it got worse second-by-second, as the panic spread. It is a day that will remain etched in the memories of many for years to come.

"Normal people shouldn't really ever hear about bond markets," says one investor at a major fund. "If fixed income ends up on the news, that's a very bad sign indeed. The whole point of something like a UK gilt [government bond] is to be boring, to tick away in the background."

Installed as chancellor four weeks ago, Jeremy Hunt faces an uphill battle to reassure investors about UK economic policy, and the first test will come with his autumn statement on Thursday.

Regime change alone cannot fix the damage caused by a largely unfunded budget unleashed during a period of global inflation and high national debt levels, investors and analysts believe.

Is Austerity the Only Way for Jeremy Hunt to Reassure the Markets?_1

"If you had a choice, you wouldn't start from here," says Paul Dales, chief UK economist at consultancy firm Capital Economics. "In the face of a recession, you'd normally see a government spend more, offer a stimulus package. They just can't do that because of inflation, and the markets are worried about it."

The pressure is on to show markets that the UK intends to live within its means. For the government, early signals are that this may mean a return to austerity at a level not seen since the aftermath of the global financial crisis in 2008.

Hunt says Britain faces a "tough road" in order to "restore confidence and economic stability". The country must "balance the books and get debt falling" and there is "no other way". To an extent, investors agree. The books do, in their view, need to be balanced over time. Some cuts in public spending may be necessary.

Toby Nangle, an independent economic and markets analyst, says: "Narrative is so important. The government is using it to frame a picture of austerity. Bond markets like austerity because it crushes the economy and that's very disinflationary.

"But what is good for the bond market and what is good for the country and the wider economy only shares a small place on a Venn diagram," he says.

A portfolio manager at BlackRock, the world's largest asset manager, who asked to remain anonymous, says that while some cuts would be necessary, the "overall package and long-term plan are more important".

Is Austerity the Only Way for Jeremy Hunt to Reassure the Markets?_2

"A larger share of the tax burden could fall on wealth. This could even improve productivity and would not have a major toll on market confidence if it was sensibly done," they said.

This does not mean the UK can afford to be complacent about its spending plans, however. Despite being a relatively rich, developed economy, the pound and government bonds have moved more like assets associated with an emerging market in recent weeks.

While the markets may appear calm, the stakes remain high, and investors are on edge.

One trader who requested anonymity says: "Put it this way: I'd stopped smoking before Trussonomics. I had three years without a fag. Now I smoke again."

Bond market "vigilantes" as they are sometimes termed, thanks to their history of forcing fiscal U-turns around the world, are more concerned that inflation is not fanned by a huge stimulus, and that the budget is funded, rather than advocating austerity for its own sake.

"It is important that it is funded. As long as it is funded the bond market vigilantes are completely fine with it," says Kaspar Hense, a senior portfolio manager at BlueBay Asset Management, an investment company which focuses on bonds. "If you take the money from the rich and give it to the poor that is completely fine for the bond market. The bond market is not too antagonistic in that sense."

Dales says a £54bn package of cuts, equivalent to 1.9% of GDP, would be of a similar magnitude to the austerity budget of 2010 overseen by George Osborne.

However, with the UK economy already likely in recession, which the Bank of England expects to be the longest in modern history, investors would probably be content with a greater balance between redistribution of wealth rather than leaning so heavily on cuts.

Poorer people are more likely to spend the money they have than their richer counterparts, who are more likely to save spare funds, which could improve long-term economic prospects.

So long as measures lead to the right kind of growth – one that is productive, increasing output an hour, rather than just feeding inflation – investors in long-dated debt might tolerate more borrowing.

Is Austerity the Only Way for Jeremy Hunt to Reassure the Markets?_3

"The other point is around productivity. If there is a believable way that debt levels will be higher but growth levels will increase by even more, then the bond market could also take that as a positive," says Hense.

"All policy measures now, when we are at high debt levels already, have to be explained carefully and have to be seen as productivity enhancing."

Increasing immigration amid a tight labour market could be one way to boost growth, increase the tax take and avoid an inflation surge, he suggests. In this way, there could have been parallels for Trussonomics with Reaganomics in the 1980s, when the then US president allowed for a rise in immigration. Some investors say that while the how was not laid out clearly, the idea of embracing higher rates of immigration was something that Truss got right.

"While in the 1980s the US had a huge increase in immigration, the UK, with Brexit, has had the opposite. A huge difference which is negative for growth," says Hense.

Investors have also warned that improving the UK's trading relationship with the European Union is critical. By building measures that can ease trade in services, the UK's economic specialism, it could increase Britain's growth prospects.

"The worry is that Sunak is a Brexiteer. We're hoping that he's a pragmatist first and foremost. The signals of smiles with him and [French president Emmanuel] Macron bode well. But trade in services is critical. Financial professionals are important for the exchequer," says the portfolio manager at BlackRock.

The UK has a high ratio of debt-to-GDP of more than 100% of GDP according to the Office for National Statistics, a measure that can help indicate how much a country can afford to borrow.

And, unlike other major economies with a large pile of debt such as Japan – an example often favoured by Truss – Britain also has a yawning current account deficit. It stands at a record of 8% of GDP and the UK depends on foreign investors to fund it.

The deficit is the result of Britain importing far more than it exports, leaning heavily on foreign investors' appetite for UK assets in order to avoid a sharp devaluation of the pound.

The high rate of borrowing and a large current account deficit, often termed a "twin deficit" problem, makes the UK's borrowing power weaker than other major economies.

But even if no-holds-barred austerity is not the only option to keep markets on side, that will not make it easy for the chancellor.

Decisions about which assets to buy or sell often rest on a risk analysis based on historical data. After recent wild yields on UK government bonds this debt comes with a riskier profile. The government will have to tread carefully for months, if not years, to avoid the prospect of a sell-off.

"You can't unburn toast," says Nangle. "It's more technical than people may realise, but in basic terms, data informs the quantitative strategy that investors take. That data is now in the machine. It's baked into the maths. It frames future decisions."

Source: The Guardian

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Devin

Economic

The Mena region displays divergent recovery patterns in the post-Covid era, with oil exporters growing at a relatively faster pace. But a global economic downturn is looming. What are the priorities for the region's financial community?

Medium and long-term risks in Mena (like climate change and regional conflicts) notwithstanding, the GCC, largely recovered from Covid-19, should shift onto an "Economic Diversification 2.0" path. While the so-called "Gulf falcons", the UAE and Saudi Arabia, are the frontrunners with regard to actively diversifying away from oil, future growth prospects require a focus on the "new economy", in addition to the "old" non-oil sectors (like tourism, infrastructure and logistics) that supported the "Economic Diversification 1.0" phase. But moving to a new diversification path necessitates new tools and investments.

There are multiple drivers of Economic Diversification 2.0. First, the new economy (including industry 5.0, the Internet of Things, AI, blockchain, FinTech and virtual assets) should be supported by an enabling set of investments and policies. This includes a broad-based embracing of the digital economy, in addition to increased investments (both domestic and regional) from the region's financial markets and sovereign wealth funds (SWFs), which are able to deploy more than $3 trillion in liquid wealth.

This should go in tandem with developing and deploying countercyclical monetary and fiscal tools and policies. The International Monetary Fund estimates that the region's oil producers could accumulate around $1tn in oil windfalls between 2022 and 2026. These funds should be used to secure fiscal sustainability, a move that has already been evident in the recent months with most GCC nations avoiding the temptation of increased spending. While reining in spending, policymakers could also use this opportunity to mobilise non-oil revenues and phase out costly generalised subsidies in favour of cash income transfers and targeted subsidies.

Liberalisation and structural reforms go hand in hand with the above-mentioned policy tools. This includes labour market reforms (like long-term residency and incentives to raise female labour force participation rates), alongside encouraging more private sector activity and accelerated capital market development. Last but not least, policies that support regional economic integration should be encouraged by accelerating the outward orientation of trade and investment policies towards Asia and Africa, other Arab countries, and the development of the Red Sea Basin, among others.

As the GCC embarks on Economic Diversification 2.0, financial markets need to be the handmaiden of growth and become an enabler of economic transformation. The low hanging fruit is the use of government debt markets to finance infrastructure and development projects as well as smooth volatile government finances. Government debt markets can become a growing source of funding to diversify away from reliance on bank financing, especially for long-term projects.

Structural change requires growing the role of the private sector. The UAE and Saudi Arabia are already undertaking a concerted push towards the privatisation of certain state-owned assets and enterprises to de-risk fossil fuel assets, with the advantages of raising revenues, diversifying financial markets, and attracting foreign investment. Recently enacted public-private partnership laws will also encourage privatisation, attract new tech and innovation and foster job creation. Financing mega projects and infrastructure via capital markets, and more efficient management of public assets will boost the development of broader, deeper and more liquid capital markets, also enabling the region's SWFs to more efficiently manage their growing wealth and domestic assets, thereby increasing financial access and deepening. Indeed, the SWFs are recalibrating their asset allocation to focus on the region to drive growth. As a case in point, Saudi Arabia's PIF plans to invest $24 billion in six Arab nations.

The ongoing global energy crisis, along with technological innovation lowering the cost of renewables, has created the conditions for a new global energy map. Alongside the GCC's existing energy linkages with Asia, new links can now be forged with Europe for gas and green/ blue hydrogen. These structural changes should be supported by a multi-faceted energy transition strategy by the region's oil producers that includes focusing on renewables, clean energy, clean technology, hydrogen and nuclear projects in light of their net-zero emissions commitments. The path to achieving the region's ambitious renewable energy targets will require massive investments, which can be financed by the issuance of green bonds and Sukuks in the regional markets and by creating dedicated "green banks" and "green funds".

For digitalisation to transform the region's economies, investments will be required in disruptive technologies and digital payments, in addition to financing digital infrastructure to expand the reach of the digital economy. Many GCC governments are already on the forefront when it comes to adoption of digital technologies: be it e-government or embracing blockchain technology in the public sector or digital currencies (for instance, Project Aber, created by the central banks of the UAE and Saudi Arabia). The region's financial regulators and capital markets led by the Gulf Falcons are embracing FinTech and crypto assets. Supporting mainstream digital solutions like MedTech, AgriTech and EduTech will increase the pace of digitalisation, assisting economic transformation.

The global political economy is under strain. The GCC has an opportunity to benefit from global decoupling and fragmentation by its unfolding "regionalised globalisation" strategy, driving and supporting regional economic integration. A growing number of free trade agreements are linking new economic partners and strengthening existing relations, while tools like foreign aid, finance of regional trade, building and sharing the services of infrastructure facilities as well as FDI and portfolio investments are transforming and improving the growth and development prospects of a broad GCC-connected region, including Mena, East Africa and Asia.

Source: The National News

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Thomas

Political

AFTER overwhelming performances in the Johor and Melaka state elections several months ago, the Umno-led Barisan Nasional (BN) was brimming with so much confidence that it pressured its own prime minister, Datuk Seri Ismail Sabri Yaakob, to call for a general election (GE15) — despite the upcoming monsoon season and objections by its government partners, Bersatu and PAS.

One week into the official campaign period after nomination day on Nov 5, the situation seems to have changed, according to various political sources.

The mood on the ground for BN is said to be not as "meriah" (festive) as in previous elections. An Umno official says: "There is no money on the ground, there is no mineral water (for the machinery workers and attendees of the ceramah) even."

That may be a bit of an exaggeration but the point he was making was clear. The election machinery on the ground has not been adequately oiled.

The blue BN flags are overshadowed by the red Pakatan Harapan (PH) ones in many constituencies, in size and numbers.

Some Umno grassroots members The Edge spoke to were concerned that the Umno top brass were not making funds available, and did not even go on the ground. One of them says that from what he understands, the corporates and other donors have contributed funds, albeit less this time around because of the damp economic climate.

"Everyone seems to be confining themselves to their own foxholes," says one political observer.

Liew Chin Tong of the DAP had at end-October indicated that Umno did not have its usual war chest. Liew said on social media, "During the 2013 and 2018 general elections, Umno was essentially oiled by (Datuk Seri) Najib (Razak)'s money, which he siphoned off from 1Malaysia Development Bhd.

"Since Najib is in jail and faces massive fines while (Umno president Datuk Seri Ahmad) Zahid (Hamidi) doesn't have that much cash for GE15, the party is facing financial problems now. I suspect even if Ismail Sabri's faction may have some funds, with no guarantee of (his) becoming PM again, they are unlikely to spend much," he said.

So, the question is, can Umno and its key partners MCA and MIC fare well in GE15, sans the usual war chest?

Many big names dropped

Another issue is that many of the big names in Umno have been dropped because of party infighting.

Arau member of parliament Datuk Seri Shahidan Kassim, Ketereh MP Tan Sri Annuar Musa, former Tanjong Karang MP Tan Sri Noh Omar and former Pasir Salak MP Datuk Seri Tajuddin Abdul Rahman were dropped.

While there is always a need for new blood, some within the party say they were dropped by party president Zahid as they are aligned with Ismail Sabri.

Many of the candidates who were dropped are Umno warlords with deep pockets, having been involved in politics for decades.

Some of the candidates, such as Shahidan, Datuk Zahidi Zainul Abidin, who was deputy minister of communications and multimedia, Datuk Seri Ismail Abd Muttalib, former deputy minister of housing and local government, and senator Datuk Azhar Ahmad were sacked from Umno for seeking to contest under other party banners.

Outspoken politician Datuk Seri Mohamed Nazri Abdul Aziz, who is a six-term Padang Rengas MP, has opted out of contesting in GE15.

All these expulsions and departures have weakened Umno.

In past elections, the stock market was used to raise funds as well, with shares of companies linked to Umno and BN soaring. With the benchmark FBM KLCI hitting a two-year low of 1,373.36 points on Oct 13, just after the dissolution of parliament, the market has been lacklustre.

Also, the ringgit hit 4.73 against the greenback last week, compared with 4.17 at the start of the year.

Against this backdrop, corporates have been hesitant to donate to Umno and BN.

The infighting within Umno is also an issue. Other than the expulsions, Zahid is seen to be trying to finish off Khairy Jamaluddin, one of the party's rising stars and one of its more prominent and capable ministers, by fielding him in the opposition stronghold of Sungai Buloh. This too has not gone down well with many.

While the opposition PH, especially PKR and DAP, have also dropped some incumbent MPs, their supporters seem to have moved on and the damage has not been as bad as that in Umno.

Zahid deemed a liability

It also does not help that Zahid's speech as BN chair at an MIC delegate assembly recently has gone viral. At the meeting in October, Zahid had said that BN's top brass could face criminal prosecution if they lost in GE15, and as such needed to secure a "dominant victory" to avoid such a fate.

"This election is the mother of all general elections. If we fail, our fate will be worse than the last election … To avoid this, we have to secure a dominant victory," he said.

Zahid is facing 35 money laundering and criminal breach of trust charges involving millions of ringgit from Yayasan Akalbudi and for allegedly accepting bribes for various projects during his tenure as the home minister.

In September, he was acquitted in one case but another is still ongoing.

Political observers say that if Umno's GE15 campaign is not gaining traction, who will the traditional BN/Umno voters go for? PH, or Perikatan Nasional (PN), which is made up of PAS, Bersatu and Gerakan?

Both PH and PN are claiming to be ahead of each other in getting the support of disgruntled BN/Umno supporters. The likely outcome is they will share the spoils. This could well mean that in the contest for the 166 parliamentary seats in Peninsular Malaysia, no one coalition — whether BN, PH or PN — will win the solid 80 to 90 seats that will make them the obvious anchor party to form a government.

GPS banking on being kingmaker

Watching the brouhaha in Peninsular Malaysia is Gabungan Parti Sarawak (GPS), made up of Parti Pesaka Bumiputera Bersatu, Parti Rakyat Sarawak, Parti Demokratik Progresif and the Sarawak United People's Party.

GPS won a landslide victory in the state elections last year, securing 76 out of 82 state seats. GPS chairman and Parti Pesaka Bumiputera Bersatu president, Tan Sri Abang Johari Openg, recently denied speculation that GPS and BN already have a pact to form the government after GE15.

But he has made known his disdain for PH, saying in its 22 months in power, the coalition had failed to fulfil its promises to the people.

"So to all Sarawakians, let's not allow the 'pisang berbuah dua kali' (don't let history repeat itself)," he said when announcing GPS' candidates for GE15.

GPS, which was formed after the Sarawak parties left BN after GE14, won 19 parliamentary seats in 2018. It is confident of winning 25 parliamentary seats out of the 31 seats in Sarawak in GE15.

With a week left to polling, it is hard to predict which coalition will emerge as the winner. There is still time for fence-sitters to make up their minds, and the "sombre" situation on the ground for BN/Umno could still change in the time leading up to Nov 19.

If it doesn't, then GE15 could produce a surprise as big as GE14.

Source:The Edge Malaysia

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Thomas

Economic

Political

As Malaysians head to the 15th general election (GE15) on Saturday (Nov 19), rising cost of living and a weaker ringgit will likely influence how they cast their ballots.

The latest indicators show mixed results. Gross domestic product logged a region-beating double-digit growth in the third quarter, while the labour force has shown flashes of returning to pre-Covid-19 levels, even as key sectors including palm oil and manufacturing continue to face worker shortages.

Here's where the economy stands prior to the national vote.

These Charts Show State of Malaysia's Economy Ahead of GE15_1

Malaysia expanded at 14.2% in the July-September period, a blow-out number even with a low base in a Covid-saddled 2021. Sustained strong demand for services and manufactured goods is likely to keep the economy clear of a recession next year, a view echoed by Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus.

Still, the rapid but uneven rebound from the pandemic may have bypassed some key electorate bases, as seen in the labour data.

These Charts Show State of Malaysia's Economy Ahead of GE15_2

Malaysia's overall jobless rate returned to a near pre-pandemic level of 3.7% in September, with levels varying with ethnicity.

Malays, the largest ethnic group, trailed other blocs with an unemployment rate of 4.1%. In comparison, Indians had an unemployment rate of 2.8%, while ethnic Chinese posted the lowest jobless rate of all groups at 2.7%.

Peninsular Malaysia, home to the capital city of Kuala Lumpur and Penang, may be the pageant winner for economic performance, but the eastern states of Sabah and Sarawak that jointly account for a quarter of parliamentary seats hold the swing blocs key to forming the next Government.

Sabah saw its jobless rate fall to 8.2% in the third quarter, but remained well behind its pre-Covid peak of 5.3%. Meanwhile, Sarawak improved to a 3% jobless rate. Female unemployment reached its lowest in 10 quarters at the end of September at 3.9%, while that for male workers was at 3.6%. The rate of youths out of jobs was high at 10.8% in the 15 to 24 age group.

These Charts Show State of Malaysia's Economy Ahead of GE15_3

Like elsewhere, Malaysia's 32.8 million people are struggling with rising cost of living, as inflation has doubled from the start of the year, despite food and fuel subsidies. Core inflation, which excludes volatile items like fresh foods, touched a seven-year high of 4% in September.

These Charts Show State of Malaysia's Economy Ahead of GE15_4

The cost for food reached a decade-high of 7.2% in August, with meat and dairy prices burning a hole in the pockets of consumers. Though the central bank governor said that overall inflation had likely peaked at 4.5% in the third quarter, voters expect the next Government to retain price controls.

A weak local currency has bloated Malaysia's food-import bill, worsening price pressures in a nation that relies on overseas purchases to meet more than half its food needs. The dollar strengthened against the nation's currency in 2022, rising to 4.5925 from 4.1615 in the latest year-on-year reading. On the flip side, a weak ringgit, rising commodity prices, and surging manufacturing sector boosted exports to a record RM146 billion in June.

While imports have grown at a higher rate than exports through September in 2022, there's little reason for alarm, given that the trade balance is in surplus.

These Charts Show State of Malaysia's Economy Ahead of GE15_5

Keeping in step with other central banks fighting inflation, BNM hiked borrowing costs for four straight sessions this year. Bloomberg Economics expects another rate increase in the central bank's next meeting in January, amid the continued increase in core inflation.

Source: Bloomberg

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Damon

UK hiring demand is clearly slowing

The UK jobs market is clearly past its peak. The question is whether we will see a significant deterioration as the economy slips into recession over the winter – and so far the signs are mixed.

Hiring demand is undoubtedly falling back now, and we can see that most clearly in a downtrend in unfilled vacancy numbers. But so far this is manifesting itself more as a hiring freeze rather than via layoffs. Redundancy numbers, be they planned or actual, are showing little-to-no sign of increasing from their lows – albeit we'd expect that to start to change fairly soon. UK hiring Demand Falls as Long-Term Sickness Rates Rise Further_1

UK hiring Demand Falls as Long-Term Sickness Rates Rise Further_1

UK labour market dashboard

The unemployment rate edged higher too – from 3.5% to 3.6% – though given the sharp rise in inactivity numbers through the pandemic, this perhaps isn't the best gauge of hiring demand right now. This rise in inactivity – ie those neither employed nor actively seeking a job – is increasingly linked to long-term sickness numbers, which rose yet again in the latest data.

There are now almost half a million additional people registered as out of the workforce due to long-term illness than before the pandemic began. Unnervingly, this seems to be a fairly UK-specific issue, and most countries have seen inactivity rates resume a long-term downtrend as the Covid shock has faded.

Recent ONS analysis confirmed that there's no single condition that's causing all this, though it's hard to escape the conclusion that ballooning NHS waiting lists are a contributing factor. Those workers that have left a job due to illness are predominantly in lower-paid sectors and roles, most noticeably in consumer services. That suggests it may well be a contributing factor to the worker shortages we're seeing in hospitality. But generally those sectors with the highest ratio of vacancies to existing employee numbers – the likes of IT and professional/scientific/technical roles – are the ones less affected by the loss of workers to long-term sickness.

In other words, sickness isn't the only factor driving labour shortages right now. Immigration is also playing a role, and the latest quarterly data showed that the number of EU nationals working in the UK fell again in the third quarter. These numbers are down by roughly 9% since late 2019, though interestingly, the number of non-EU (and non-UK) nationals employed in Britain is up by a third over the same period. UK hiring Demand Falls as Long-Term Sickness Rates Rise Further_2

UK hiring Demand Falls as Long-Term Sickness Rates Rise Further_2

The number of EU nationals working in the UK has fallen through the pandemic

The bottom line for the Bank of England is that skill shortages are unlikely to be resolved quickly. Its own surveys have shown that the percentage of firms reporting difficult hiring conditions has stayed resolutely high, and wage growth expectations have climbed to almost 6%. If we're looking for signs that the Bank is about to halt its tightening cycle, the jobs data probably isn't the place to look.

Nevertheless, with inflation close to a peak and the economy headed for recession, we still think investors are overestimating the scope for further rate rises – albeit less so than a few weeks ago. We expect a 50bp hike in December and the Bank rate to peak around 4% early next year.