Asia week ahead: Korea and Taiwan inflation data and China manufacturing figures

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South Korea holds local government elections on 3 June to choose the executive branches of local authorities. These contests are more significant for gauging public support for the national government than polls on economic policy. If the current majority party wins, the government may have an easier time delivering its main policy agenda. We expect an expansionary fiscal stance to strengthen and take a centre role in economic policy for the latter part of this year and next.

Consumer prices are expected to hit 3.0% year-on-year in May. Despite the government’s price control on fuel, other materials and service fees likely increased. Pipeline prices rose sharply, so it should begin to be passed on to consumer prices.

Meanwhile, strong chip exports will boost overall exports in May. Early data already showed chip exports accelerated sharply. We expect exports to rise 52% YoY in May, while higher energy prices also pushed imports up by 25%.

China purchasing managers’ index data is the highlight in the week ahead. The National Bureau of Statistics releases its official PMI on Sunday. We’re looking for a slight moderation in the manufacturing PMI to 50.1, and a slight recovery for the non-manufacturing PMI to 49.6. The RatingDog PMIs follow later in the week.

Taiwan publishes its May CPI inflation data on Friday. We’re looking for inflation to heat up to 2.2% YoY as the impact of higher energy prices starts to show in the inflation data. If so, it would be the first month in which CPI inflation has eclipsed the 2% target since April 2025. Taiwan remains almost entirely dependent on imported energy, making it susceptible to higher prices. We expect inflation to peak toward the middle of this year, raising the risks for a potential central bank rate hike at the coming meetings.