Asia Week Ahead: Inflation affecting growth momentum?

The economic calendar remains relatively light in Asia as October comes to a close. The focus is likely to shift to assessing whether the recent pickup in price pressures is taking a bite out of the growth momentum. Both Korea and Taiwan report 3Q GDP and our Chief Economist for Greater China, Iris Pang, expects Taiwan to post a decent 2.5% YoY expansion after the 7.4% showing in the previous quarter.

Iinflation readings from Australia and Singapore could show whether supply chain bottlenecks are fanning additional price pressures as we near the end of 2021. Singapore could see CPI inflation steady at 2.4% but core inflation, which is closely monitored by monetary authorities, could pick up to 1.1%. Inflation concerns helped convince officials at the Monetary Authority Singapore (MAS) to tighten policy last week, sooner than most market participants had anticipated.

Throughout the week, we will also get economic reports on industrial and manufacturing output. Iris Pang forecast a 12.5% YoY rise in industrial output for Taiwan, as manufacturers benefit from robust demand for semiconductors amidst the global chip shortage. Industrial production is expected to stay strong to close out the year and help bolster overall growth. Singapore, Japan and South Korea will have separate reports on manufacturing and industrial output throughout the week as well. Lastly, central bank activity has thinned out, with only the Bank of Japan (BoJ) set to decide on monetary policy in the coming week. The BoJ is likely to retain its accommodative stance, so we don’t expect any surprises here.