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Why is there such a disconnect?

This article is more than 12 months old

While the sentiment among investors and analysts has picked up, the anecdotal sentiment among ordinary people still seems weak

The numbers, it must be said, are looking good.

The US economy has been growing at over 2 per cent. Europe actually grew faster than the US in the first quarter. Asia is growing at around 5 per cent.

The sentiment for manufacturers, based on various surveys, is buoyant all-round.

No wonder analysts have taken to calling 2017 the year of the synchronised global recovery. Reflation is a buzzword, and interest rates may finally go up.

In Singapore, the property segment seems to be enjoying a revival. Office rents seem to be bottoming.

In the region, things feel downright heated in cities such as Beijing, Shanghai, Hong Kong, Ho Chi Minh City and Bangkok.

In the broader corporate sector, earnings forecasts are being revised upwards for the first time in years.

Stock markets seem to be anticipating better times. In Asia, most markets are up over 20 per cent year-to-date.

But deal in the abstract for too long and you tend to lose touch.

While sentiment among investors and analysts has picked up, anecdotal sentiment among ordinary people across various markets still seems weak.

Amid the slew of positive headlines, as somebody in Tokyo told me: "The numbers are there, but I do not feel anything."

For her, wages still have not gone go up in years, even though inflation is apparently coming back.

It is a similar story in Taiwan, where an electronics recovery has lifted its stock market to new heights.

In Singapore, the economy still seems soft, based on my interactions with business owners and friends.

Why is there such a disconnect?

The most important reason for the disconnect, I think, is that wage growth remains sluggish for many people.

In Singapore, the statistics show that the median gross monthly income for full-time workers, excluding their employers' Central Provident Fund contributions, inched up to $3,500 in June last year from $3,467 a year ago.

But a $33 increase might mean that for every person with a $100 increase, another two saw flat pay.

The picture is mixed across higher-income earners.

More than 13,000 people joined the ranks of those making $4,000 to $4,999 a month last year, compared to 2015.

Almost 14,000 joined the ranks of those in the $7,000 to $8,999 range. Given that the labour force has barely budged, there are significant numbers of people doing better.

But mid-2016 marked the point where the number of earners making $12,000 or more a month dropped after increases through 2009 to 2015. There were 135,600 of these people in mid-2016, versus the 139,500 in mid-2015.

Also interesting is how a significant number of males dropped out of this category, while the number of females increased.


Wage statistics are backward-looking. Perhaps things are worse, given how the unemployment rate has been inching up throughout last year.

The wage growth problem might be greater elsewhere.

As HSBC put it in a recent report: "Japan is the best example of this, but the US, Europe and parts of Asia face similar issues.

"By some measures, income growth has halved in China over the past decade."

China's purchasing power has also dropped with the depreciation of the yuan, the report noted. That also affects trade.

One problem with statistics is that the sweeping statements are often made in aggregate, whereas the individual experience can be very different.

As the old joke goes, when Microsoft co-founder Bill Gates walks into a bar, everybody on average becomes a millionaire.

Rising inequality can explain why only a select few - entrepreneurs in the right places, US fund managers and property investors - feel bullish.

Strong gross domestic product numbers are one thing, but if wages are growing slower than housing, education and healthcare costs, people will feel left behind.

Another argument out there is how technology and the Internet have caused prices and wages to fall.

Retailers, media personnel, research analysts, travel agents, remisiers, taxi drivers, bankers and hoteliers have seen their livelihoods threatened by technology platforms.

But I do not buy the technology argument completely - your job might be at risk, but you should be enjoying cheaper air travel, taxi fares and hotel stays.

You might be spending money more efficiently after going through multiple websites and reviews.

With the Internet, you can also entertain and educate yourself in ways unimaginable to those living 20 years ago. So while things might feel soft, your standard of living might be higher than you think.

What does this all mean?

If you are thinking that your life does not quite match up to the booming electronics, stock or property markets, you are probably right.

Only a select few will be partying like it is 1999 or 2007. Most of us are just chugging along.

One of my favourite indicators is CapitaLand Mall Trust, where shopper traffic is falling slightly along with tenant sales. Cautious consumer spending is apparent.

The fundamentals do not seem that strong, even while debt levels are high.

With the US 10-year bond yield down to just over 2.1 per cent and oil prices dipping, the market is predicting that growth will remain sluggish.

To be invested in stocks means you have to be a bit more optimistic. So here is to hoping the next crisis will not hit for some time. But always have reserves, just in case.

This article was published in The Business Times yesterday.