MNI ASIA PAC Weekly Macro Wrap:

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Executive Summary:

JAPAN 

• This week delivered softer than expected labour earnings and household spending outcomes for June. It did remove some of the divergence seen in May though. The BoJ Summary Of Opinions noted inflation risks, but any shift to tighten rates is likely to be at the end of this year (rather than sooner). 

AUSTRALIA 

• June household spending printed at 0.5% m/m bringing the annual rate to 4.8% up from May’s 4.4% though. Q2 consumption volumes rose 0.7% q/q, third consecutive gain, up from Q1’s 0.5% signalling that private spending in the national accounts on September 3 could be slightly higher than Q1’s 0.4%.
• The Melbourne Institute headline inflation gauge for July showed a material increase to 2.9% y/y from 2.4% in June. Its trimmed mean measure rose to 1.9% y/y from 1.2%, the highest since January. This can lead the monthly CPI trimmed mean by up to 6 months and thus could be signalling that it troughed in June.

NEW ZEALAND

• NZ employment was weaker in Q2 than the RBNZ projected in May declining 0.1% q/q and 0.9% y/y. The unemployment rate rose 0.1pp to 5.2%, highest since Covid-impacted Q3 2020, but as the RBNZ forecast. The next rate decision is on August 20 and will include an updated outlook. With job shedding continuing and activity indicators remaining lacklustre and inflation in the band, another 25bp rate cut is likely.
• Q3 inflation expectations were stable in the RBNZ’s survey of forecasters, economists and industry leaders. 1-year ahead they remained at 2.4%, while 2-years ahead at 2.3%.

SHORT TERM RATES 

• Interest rate expectations across the $-bloc eased over the past week, led by the U.S., where year-end implied rates fell 26bps. Canada, Australia, and New Zealand saw more modest declines of around 5bps each. 

CHINA

• China's S&P Global China PMI (formerly CAIXIN) came in ahead of expectations in July. Up at 52.6, it was material increase from June's result of +50.6 and estimates of +50.4.
• After a contraction in February ahead of the imposition of tariffs, China's exports have maintained positive momentum. Exports in USD terms were up +7.2% against estimates of +5.6% with June numbers revised up to +5.9%. In CNY terms exports expanded +8.0%, from +7.2% in June.

SOUTH KOREA

• South Korean CPI shows slight moderation to +2.1% vs +2.2% in June. The slight softening potentially provides opportunity for the Central Bank to cut rates again. 

ASIA 

• Thailand and the Philippines saw a further moderation in inflation in July. 

ASIA EQUITY FLOWS 

• Positive Taiwan inflow momentum remains the standout for the region. Trends are mixed elsewhere. 

GLOBAL 

• Looking at Asian trends, the 12-month sum of the US deficit with Japan has stabilised, narrowed with China and Korea, but deteriorated with India and especially Taiwan.