经济月报（2023年7月）

July 2023 Global: Lower risk of recession but economy could slow down ahead China Growth is slowing down amid fading reopeningtailwinds, weak global demand, and US-ChinatensionStructural problems will limit policy space and itseffectiveness. EuropeStrong labor market and falling commodity prices would lead to only“mild recession” in 2023.ECB might continue to hike rates untildeposit rates reach 3.75-4.00% tocombat inflation. US Japan Tight labor market and strongservices sector might allow the Fedto hike rates in July.After that, FOMC might end thisrate-hike cycle premised ondownside risk to growth and effectsof positive real interest rates. Wage hike policy against abackdrop of high inflation couldstrengthen domesticconsumption and offer morespace to tweak monetary policy. Goodnewsissofteninginflationinresponsetomulti-yearhighinterestratesinkeycountriesbutpolicymovesandfadingreopeningtailwindscoulddampeneconomicgrowthahead US:FOMC might end this rate-hike cycle possibly after another hike in July premised onsigns of disinflation, downside risk to growth, and effects of positive real interest rates KrungsriResearch’sviewMay-23 MostFedofficialsprojecttwomoreratehikesthisyearamidconcernsoverstickyinflation.TheFedmighthikeratesattheJuly26meeting,by25bpsto5.25-5.50%tocombatinflation,premisedonthefollowing:(i)tightlabormarketandhighwagewithlowunemploymentrate(3.6%inJune),still-highaveragehourlyearnings(+4.4%YoY)andjobopeningswhichremainwellabovepre-pandemiclevel;(ii)growthinservicessectorwiththeISMServicesPMImarkingthestrongestgrowthin4monthsinJune;and(iii)resilientbankingsectorwithall23oftheUSbiggestbankspassingthestresstest. However,policymovesthisyearcouldbelesshawkishthantheFed’sprojectionandtheFedmightendthisratehikecycleafterpossiblyhikingratesinJulyduetothefollowingfactors:(i)Signsofshifttowardsdisinflation:ConsumerPriceIndex(CPI)roseonly0.2%MoMinJuneandcoreCPIinchedup0.2%,thesmallestrisesinceAugust2021.Headlineandcoreinflationsoftenedto3%and4.8%YoY,thelowestsinceMarchandOctober2021,respectively.(ii)Downsiderisktogrowth:Despitegrowthintheservicessector,factoryactivityshrankbythelargestmagnitudeinnearly3yearsinJune.TheLogisticsManager’sIndexhitanewlowinJune.Non-farmpayrollsgrewbyanaverageofonly278Kpermonthin1H23vs399Kpermonthin2022.Personalspendingonlyinched-up0.1%inMayand1Q23corporateprofitsfell5.9%,markingthesharpestdropsince4Q20.(iii)Impendingfull-effectsofmulti-year-highinterestrates:FinancialconditionsareclosetothetightestsincetheGlobalFinancialCrisis,whichcouldhiteconomicactivityahead.ConsumercreditpostedthesmallestmonthlygainsinceNovember2020.Despitetheresilientbankingsector,theStressTestshowedmanymid-sizebanksexperiencedsteeperlossesandtookbiggerhitstotheircapitalratioscomparedtotheaverageacrossall23banks.Highinterestratescouldaddriskstobanks.Premisedontheaboveandrealpolicyratereversingtopositive,weexpectonlyonemoreratehikeinJulyandtheFedtoholdratestherestofthisyeartopreventasharpslowdownintheUS. Euro-zone:Strong labor market and falling commodity prices could lead to only“mildrecession”in2023 KrungsriResearch’sview EurozoneGDPisprojectedtocontractagaininQ2astighterfinancialconditionsandrisinginterestrateshavedraggedconsumptionandprivatesectorinvestment,andtheslowerhousingmarketwillreduceconstructionactivity. InJune,theEurozoneCompositePMIslippedtoa5-monthlowof50.3.Withinthis,theServicesPMIfellto52.4andManufacturingPMIdroppedto43.6,markingthe11thmonthofdeclinesanda3-yearlow.InJuly,theZEWIndicatorofEconomicSentimentcontinuedtodropto-12.2,thelowestreadingsinceDecemberlastyear.InQ1,theHousingPriceIndex(HPI)markedthe2ndstraightquarterofdecline.However,weexpectcheaperenergypricesandstill-stronglabormarkettomitigatethedownsiderisk.InMay,unemploymentratestoodatarecordlowof6.5%.Thisisbetterthanlastyear(6.7%),whichimpliesthelabormarketremainstightandissupportingwageandincome.Despitethesteepdropinheadlineinflation,coreinflationremainsstrongduetothetightlabormarket.Meanwhile,thefulleffectsofmonetarypolicytighteninghaveyettobefelt.Againstthisbackdropandsignalsbythecentralbankatitslatestmeeting,weexpecttheECBtocontinuetohikeratesuntilitsdepositratereaches3.75-4.00%from3.50%currently,totrytostabilizepricesandpullmid-terminflationratesbacktoits2%target.InJune,headlineinflationslowedto5.5%YoYfrom6.1%amonthearlier.Itistheslowestsince January2022.Meanwhile,coreinflationroseforthefirsttimeinthreemonths,marking5.4%vs5.3%thepreviousmonth. Japan:Wagehikepolicyagainstbackdropofhighinflationcouldstrengthendomesticconsumptionandspacetotweakmonetarypolicy KrungsriResearch’sview Modestwageincreasestooffsetpersistentinflationcontinuedtodepressworker’srealwage,whichdropped1.2%inMay,markingthe14thstraightmonthofdecline.However,asurveybyRengo-Japan'sumbrellatradeuniongroup–suggestsJapanesefirmsofferedanaveragepayhikeof3.58%for2023,thebiggestriseinthreedecades,toworkersatsmallandmediumenterprises(SMEs)orthosewithunionsof300orfewermembers.Thisisexpectedtoliftrealwagestopositiveterritoryandr