Asia week ahead: China data and regional trade reports out

The coming week features several data reports from China bannered by growth figures for the second quarter. China’s GDP report for 2Q22 should reflect the contraction of activity given the lockdowns experienced during the period.

Recent activity data for June should signal a recovery for retail sales as Covid-19 measures were relaxed and fewer lockdowns were implemented during the month. As such, we do not expect any change in the 1Y Medium Lending Facility policy rate, and loan growth should pick up as the government has urged banks to lend.

Next week also features a couple of data points that could help central banks chart their next set of moves.

The Reserve Bank of Australia's (RBA’s) latest statement repeats that “the size and timing of future interest rate increases will be guided by the incoming data and the board's assessment of the outlook for inflation and the labour market”, so the latest labour market report (June data), together with inflation data released later in the month, could help determine whether the RBA sticks to 50bp hikes next month, or scales up to 75bp or even larger. We anticipate a 50,00 increase in total employment, evenly split between part-time and full-time jobs, and a fall in the unemployment rate to 3.8%.

Meanwhile, the Reserve Bank of India (RBI) could be monitoring the latest price gauges to help chart its next move. India’s June inflation is out next week and will probably stay at 7.0%, down from the recent peak of 7.8% following cuts in fuel excise duties. A slight moderation in food price inflation should keep the monthly CPI gain to only 0.5%. This takes the immediate pressure off the RBI, which has stepped up the pace of its tightening recently, though we still expect another 50bp hike at the 4 August RBI meeting.

Regional trade data will be in focus in the coming days with both Indonesia and the Philippines reporting their numbers. Indonesia’s trade surplus is set to widen further as authorities gave the go signal for the partial resumption of palm oil exports. Exports and imports are both likely to gain by double digits with the trade surplus possibly jumping to $5.2bn.

On the other hand, the Philippines will be seeing its trade balance move in the opposite direction as its deficit widens to -$5.3bn. Philippine imports are expected to sustain the robust double-digit pace of growth as the oil import bill more than doubles due to pricey crude oil.

The Bank of Korea will meet on Wednesday. We expect it to raise 50bp at next week’s meeting in response to the higher-than-expected CPI inflation for June and rapidly rising inflation expectations.

Lastly, Singapore reports GDP figures and we expect a 4.9% YoY gain for 2Q. Economic reports have been surprising on the upside with NODX, industrial production and retail sales all beating consensus estimates for most of the quarter.