7 September 2018
Asia week ahead: China and India dominate

A data-packed week in China and India, but the trade war and crisis in emerging economies are likely to persist as key drivers for Asian markets

China: Economic activity apart from exports likely to show some strength

China’s August data flow begins with trade data over the weekend. Judging by the PMI new export orders component, which was below 50 for the third straight month in August, some weakness in actual shipments looks to be in order. However, Korea’s trade data for August shows that Asian exports have so far been resilient to the trade war. Although China is on the frontline in the trade war, the impact of the first $50 billion of tariffs is expected to be small. Our forecast of 7% year-on-year August export growth implies only a negligible month-on-month fall.

The other Chinese data – inflation, retail sales, fixed asset investment, industrial production, and money and bank lending – will be closely monitored for evidence of domestic policy stimulus kicking in to offset the trade drag. A higher manufacturing PMI in August is a hopeful sign of this, and it also supports our view of slightly better industrial production growth of 6.2% YoY compared to 6.0% in July.

Key events in EMEA and Latam next week

We expect Turkey to hike its one-week repo rate on Thursday to further support the lira. Also watch out for strong inflation readings from the EMEA and Latam regions 

Turkey: Hike expected to prevent a TRY slide

The Central Bank of Turkey tightened liquidity again last month, pulling the effective cost of funding up to 19.25%. The bank signalled a hike in policy rates following the latest inflation release to halt a slide in the Turkish lira and restore price stability. Accordingly, we expect the bank to raise the one-week repo rate by 325 basis points to 21%, and start funding banks via one-repo auctions again.

Meanwhile, growth in 2Q is likely to decelerate to 5.4% year-on-year given that the PMI has fallen below the 50 threshold, sectoral confidence indicators have declined and industrial production and retail sales have softened. 

Key events in developed markets this week

Developed markets pick up the pace in the week ahead. US retail sales and inflation data will provide further clues about future Fed policy while in Sweden, investors will focus on the result of Sunday's general election  

US: spend, spend, spend

US consumer sentiment continues to be boosted by tax cuts, a strong jobs market and rising asset prices. This suggests that retail sales should continue to grow strongly with already released auto sales number offering support for a robust 0.6% month-on-month number. Gasoline price edged lower through the month so there is perhaps a little downside risk from gasoline station sales. This also means that consumer price inflation may be more muted than the consensus expects. We look for both headline and core inflation to rise 0.2%. This would see headline annual inflation slip to 2.7%, but given the risks from an ever tightening labour market, the Fed looks set to hike rates again in both September and December.

Reading time around about 3 minutes

Our view on next week’s key events

Discover what ING analysts are looking for next week in our global economic calendars

 

In this bundle