Asia Week Ahead: China’s activity data at a glance
The week ahead
Activity data from China tops the list next week as data on industry, retail and more will be announced. Although the upcoming reports do not account for recent shutdowns, they could be a useful measure of the health of China’s economy ahead of the shutdowns. In addition to China data, we also have labor data from Australia and India inflation report. Other data reports in the week ahead are trade data from Indonesia and MPC minutes from Korea, which could inform future rate hike decisions. Finally, Japan is reporting basic machinery orders which are expected to fall amid a slow global recovery.
China to share key economic data
We should continue to see weak growth in Chinese industrial production and weaker growth in investment in fixed assets, as these will be largely dragged down by residential projects. Retail sales could show slightly better growth due to the summer holidays, as this year’s inbound travel showed more activity than last year due to more flexible social distancing measures.
We expect no change in the policy rate on the 1-year medium-term lending facility to 2.75%, as the People’s Bank of China (PBoC) took a wait-and-see approach after cutting the rate last month. Loan growth is expected to jump in August as the central bank cut interest rates and provided advice to banks to increase lending.
Australia Labor Report
The Australian labor market report for August is also expected to be released next week. The Reserve Bank of Australia has made labor market conditions a key factor in its rate-setting behavior, given that official inflation and wage data are only released quarterly. In July there was a drop of 40,900 in total employment, running counter to all the anecdotal evidence of labor shortages in Australia.
We would be looking to replace many of the 86,900 full-time jobs apparently lost in July, and would expect the total median to rise by +30,000 with up to 55,000 jobs possibly added for the month. This could lead to a further decline in the unemployment rate, but we believe the current 3.4% should hold, as employment numbers and the unemployment rate are not directly linked.
Indian inflation could climb to 7% after recent reprieve
Some of the recent moderation in India’s high food price inflation may fade in response to extreme weather and other factors, which could lead to headline inflation rising towards the level 7% year-on-year. But if energy prices remain under pressure in the coming months, this rise in inflation could prove to be short-lived. India also provides industrial production data for July. This is expected to decline sharply from June’s 12.3% year-on-year rate as reopening raises have run their course.
Indonesia Trade Data, BoK Minutes and Japan Machinery Orders
Other data reports in the week ahead include August trade data from Indonesia and we expect recent trends to continue. Exports and imports are expected to remain in expansion mode, but exports are expected to outpace imports again, resulting in a large surplus. The trade surplus could stand at around $4.5 billion, which could support the Indonesian rupiah in the short term.
Meanwhile, the minutes of the Bank of Korea’s Monetary Policy Committee (MPC) meeting in August will be released on Tuesday, revealing members’ views on future rate hike decisions. Korea is also releasing labor data, with the jobless rate expected to climb to 3.0% in August as bad weather hurt construction and some services.
Finally, due to a weak recovery in global demand, major machinery orders in Japan in July are expected to decline and export growth is expected to slow in August.