Asia week ahead: Beginning of a new month
Given the pandemic shows no signs of subsiding, a weak economic tone will almost certainly be carried over to August. Unfortunately, central bank monetary easing to support growth has also reached its limits
Start-of-the-month activity data
Next week’s Asian economic calendar is rammed with the usual start-of-the-month activity data and much more.
The week will kick-off with July manufacturing purchasing manager index releases, which may show some pick-up in manufacturing around the region. As of June, PMIs of the most Asian economies were below 50, indicating a contraction.
July exports figures from China, Korea, and Taiwan will shed light on how global demand is behaving as the second wave of Covid-19 pandemic gains traction. On a positive note, Korea’s business survey indicator for August this week revealed exports are recovering. We expect hard data to show export gains on a monthly basis but year-on-year growth rates continuing in the negative region.
A slew of countries will report consumer price data for July. Low-to-negative inflation has been the order of the day amid weak demand as will be underpinned by consumer confidence and retail sales figures from some countries.
Lastly, on the data front, Indonesia and the Philippines will report GDP for 2Q20. No prizes for guessing the numbers will be worse than 1Q - most likely the worst-ever.
And some central bank noise
Three Asian central banks are meeting next week – the Reserve Bank of Australia, the Reserve Bank of India, and the Bank of Thailand.
With their policy rates at all-time lows and focus on monetary easing working its way into the real economy, Australia and Thailand's central bank meetings in all likelihood will pass as non-events. We aren’t expecting either Bank to alter policy next week. Meanwhile, the RBA’s policy minutes may provide some insights about the future policy course.
Thailand's central bank has been saving available policy space for a worst-case scenario, as Assistant Governor, Titanun Mallikamas, indicated recently. With the policy rate of 0.5%, there isn’t much left. However, speculation about quantitative easing is likely to gain traction amid a change of reign at the central bank.
This means all action is likely to be saved for India’s central bank meeting. We have been calling for one more 25bp cut in this cycle. However, a spike in CPI inflation during the pandemic above the RBI’s 6% policy limit has taken the steam out of this forecast. Still, we are keeping our rate cut forecast for next week.
The consensus is almost evenly split on a ‘25bp rate cut’ and an ‘on-hold’ outcome.
Asia Economic Calendar
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