Asia week ahead: China’s Two Sessions and inflation data

The Two Sessions wraps up next Tuesday. Various policy announcements are expected to shed light on Beijing’s stimulus and reform plans. China’s February consumer price and producer price inflation data are scheduled for Sunday. We anticipate that the Lunar New Year effect will push CPI inflation back into negative territory to a -0.3% rate year on year. PPI inflation is likely to remain negative as well. Additionally, February credit data is expected sometime next week. Markets anticipate that both aggregate financing and new RMB loans will show an acceleration.

South Korea’s jobless rate is expected to continue dropping thanks to government job programs. However, private hiring should remain weak. Construction is struggling amid ongoing restructuring efforts. Meanwhile, companies in services such as entertainment, eating out, and leisure are seen cutting jobs amid weak business conditions.

We expect labour cash earnings growth to moderate somewhat, largely due to a slowdown in bonus payments. Also, a spike in inflation in January is likely to push real earnings back into negative territory. Fourth quarter GDP is likely to be revised downward slightly from 0.7% quarter on quarter, seasonally adjusted, to 0.5% as capital spending comes in weaker than expected.