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PP 7767/09/2010(025354)

Economic Highlights


10 May 2010

1 European Union Said To Be Looking At US$645bn Fund

to Calm The Sovereign Debt Crisis

2 US Unemployment Rate Inched Up But Non-Farm Payrolls

Rose In April; Consumer Credit Picked Up In March

Tracking The World Economy...

Today’s Highlight

European Union Said To Be Looking At US$645bn Fund to Calm The Sovereign Debt Crisis

European Union (EU) finance ministers were reported to have agreed to set up an unprecedented loan package worth
at least US$645bn to prevent Greece’s fiscal woes from spreading and shattering confidence in the euro. In seeing last
week’s slide in the euro to a 14-month low and soaring bond yields in Portugal and Spain, the Euroland governments
sketched out plans to make €440bn (US$570bn) available, with €60bn more from the EU’s budget, according to people
familiar with it. The International Monetary Fund (IMF) is asked to provide an unspecified additional sum as well.

Although the EU and the IMF have agreed to provide €110bn aid package to help Greece, the move failed to stabilise
the financial markets. Indeed, the slow reaction from the Euroland governments made investors skeptical about how
effective the aid package will be, causing the US and other equity markets to plunge. Investors expect the European
Central Bank (ECB) to do more, including extending taking other nations’ debt as collateral if the need arises, renew a
programme of lending unlimited cash to banks for a year, and even start buying government debt if the bailout plan for
Greece fails to stem the euro’s slide. The ECB, however, has resisted pressure from investors to take new steps to
contain the government fiscal strains after it eased rules on 3 May for the second time in a month to guarantee that
it will keep taking Greek government bonds as collateral for loans despite the downgrade. At the same time, it is trying
to convince investors that turmoil in the Euroland markets will subside once the Greek government draws on its €110bn
aid package and implements an austerity plan.

Meanwhile, the IMF announced that it has approved a €30bn standby loan to Greece, part of the €110bn rescue package
with the European Union, to help prevent a government debt crisis from engulfing other countries sharing the currency.

The US Economy

Unemployment Rate Inched Up But Non-Farm Payrolls Rose In April

◆ US unemployment rate inched up to 9.9% of total labour force in April, after remaining stable at 9.7%
for the last three consecutive months, as more people who had previously given up hope entered the workforce
to look for jobs in view of a pick-up in economic activities. Non-farm payrolls, on the other hand, recorded
an increase of 290,000 jobs in April, compared with a job gain of 230,000 in March. This was the fourth
consecutive month of increase in jobs, suggesting that the US economic recovery is becoming more
sustainable. The pick-up in jobs was reflected in the manufacturing and construction sectors, which added 44,000
and 14,000 jobs respectively in April. These were aided by further labour recruitment in the services industry,
which recorded an increase of 166,000 jobs in April, the fourth consecutive month of increase and compared with
a rise of 119,000 jobs in March. This was mainly on account of a pick-up in jobs in professional & business services

Peck Boon Soon

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10 May 2010

and leisure & hospitality sectors as well as a turnaround in jobs in financial services sector. A pick-up in
employment by the government sector also helped. These were, however, offset partially by a slowdown in
employment in retail trade and education & healthcare sectors. Indeed, the temporary government hiring of about
970,000 workers in April and May for the Census Bureau to conduct the population count that occurs every 10
years will likely have a big impact on payroll figures, when the bulk of the hiring will take place in the next few
months, and will then subtract from the job count the following months as employees are dismissed after the work
is done.

◆ Consumer Credit Picked Up In March

US consumer credit rose by US$1.9bn or at an annual rate of 1.0% in March, a rebound from a decline
of US$6.2bn or -3.0% in February. This was the second increase in three months, suggesting that consumers
are more willing to borrow and spend, albeit cautiously. A rise in confidence to finance spending was in line
with an improvement in the job market. This, in turn, will help support consumer spending in the country. The
pick-up was reflected in a faster increase in non-revolving debt (+US$5.1bn in March versus -US$0.2bn in
February), which include loans for automobiles and mobile homes. This was aided by a smaller contraction in
revolving debt (-US$3.2bn in March versus -US$6.0bn in February), such as credit cards. The Fed’s report does
not cover borrowing secured by real estate.


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