Asia Week Ahead: India In The Spotlight

A big data week in Asia will offer central banks a glimpse into unfolding growth-inflation risks as two of them meet next week. India will take the spotlight for the fourth-quarter FY20-21 GDP report as well as the Reserve Bank of India meeting.

Start-of-the month activity data

The usual Asian calendar highlights at the start of the new month are the purchasing manager indices and inflation figures for the previous month.

The advance PMIs for May from developed economies (the US, Eurozone, and Japan) painted a mixed picture – the US and Eurozone’s revealed firmer activity in both manufacturing and non-manufacturing areas, whereas Japan showed weakness in both sectors. Big swings, however, were observed in services PMIs, and it looks like these are driven by the Covid-19 situation, which has been stabilizing in the US and Europe but worsening in Japan.

We expect the PMIs from the rest of Asia to follow the same course – improving in countries with falling Covid-19 cases and weaker in those with rising infections. The most market-sensitive PMI data will be from China, which are expected to be solid like the US and Eurozone, while PMI data from Malaysia, Singapore, and Taiwan should be in the weak camp.

Korea’s exports for May, the first export data for this month from the region, will be an interesting watch for what it says about the global semiconductor cycle and provide further insight into the export-led recovery in Asia. A 26% year-on-year rise in Korean chip exports in the first 20 days of the month was good news that the full-month data should confirm.

Lots of consumer price indices will reinforce elevated inflation pressure, though that mostly comes off the sharp inflation fall a year ago instead of any underlying demand strength currently. And the fact that this is going to be a brief phase of high inflation suggests that this data won’t work up the markets.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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