29 March 2018
Asia week ahead: First test of US protectionism

Korea’s trade data is the first test of increased US trade protectionism. Improving growth may lead India’s central bank to step up the anti-inflation rhetoric, while inflation in the region except the Philippines continues to be benign

First test of US trade protectionism

Korea’s trade data for March released over the weekend was the first test of the impact of increasing US protectionist policies on Asian exports. Data has yet to capture the full impact; 6.1% year-on-year export growth in March was slightly below consensus yet a pick up from 3.9% in the previous month.   

Korea is the world’s fourth-largest steel exporter, and one of Asia's biggest and the US is its top destination with 12.5% of total steel exported in 2017. However, tensions have eased with talks of the free-trade deal between two countries.

Korea’s total exports grew by a respectable 10.3% year-on-year in the first quarter of 2018, led by a sustained strong growth in semiconductor exports by 46% and strong demand from China and Europe. Absent a significant tariff shock trade should continue to be the key driver of Korea’s GDP growth this year.  

Key events in EMEA and LATAM next week

It's a big week for EMEA data ahead of a general election in Hungary next weekend

Hungary: Expect mixed economic data ahead of the general election

In Hungary, we expect the manufacturing PMI to head south, in line with the recent moves all across Europe. The latest hard data could also be mixed. We think industrial production could disappoint, having come to a temporary halt in February, while retail sales may soar further given increasing real disposable incomes. 

There is also a general election set to take place on 8 April, where our base case is for a Fidesz/KDNP win with a simple majority. From a market perspective, this should be a fairly neutral/slightly positive outcome.

Key events in developed markets next week

US jobs, Eurozone inflation and UK PMIs will be in focus in what is a jam-packed week for data

US: Jobs report in focus with markets on the lookout for wage pressures

It's fair to say the past couple of jobs reports have been pretty rosy. Employment has soared since the start of the year, and according to the household survey, well over a million new workers have entered the labour force. While this undoubtedly good news, it has led to questions about whether there is in fact more slack in the economy than thought - and by extension, whether a larger pool of workers will keep a lid on wage growth.

However, we don't think this is the case. Surveys are increasingly pointing to labour shortages; a measure of vacancy length shows that it's taking firms almost twice as long to fill posts as it did during the depths of the crisis. And according to the NFIB small business survey, the proportion of firms planning to raise compensation is the highest since the early-2000s. This is also what we are hearing from our own US corporate clients, many of whom are worried about not being able to fill posts at all should employees quit.

With this in mind, we expect a modest recovery in wage growth next week and look for it to test 3% again later this year. This is one of the main reasons why we expect four hikes from the Federal Reserve this year.

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Our view on next week’s key events

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

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