Asia week ahead: Regional inflation readings and an MAS decision

China’s CPI inflation has returned to positive territory last month after it briefly slipped to -0.3% year-on-year in July. We expect the inflation to edge slightly to 0.4% YoY as the recent data suggests that the government’s efforts to boost the economy have had some impact.

On top of that, surging oil prices are likely to increase transport and energy costs for the period.

With supply concerns easing for key vegetables like tomatoes and onions, prices for these important commodities should moderate. As food items account for the bulk of the overall inflation basket, this should help bring India’s inflation down to 5.8% YoY, just within the 2-6% target range set by the Reserve Bank of India.

The Monetary Authority of Singapore (MAS) is likely to retain its current policy setting next week. The MAS looks to balance slower growth alongside still elevated inflation and will opt to keep settings untouched. Growth has struggled as of late, with exports dragged down by soft global demand. Meanwhile, inflation has been on the downtrend but could flare back up given a renewed rise in global energy prices.

Singapore’s third-quarter GDP figures will be reported next week. We expect growth to settle at 0.6% YoY, rising 0.8% from the previous quarter. Retail sales were the lone bright spot for Singapore, managing to post modest growth for the quarter.

The return of visitors to Singapore could be one factor helping support retail sales. On the other hand, contracting industrial production and falling non-oil domestic exports will be the main elements pulling down growth.