On top of the data: All over the place

  China data have improved, but the Mainland economy is still fragile; we expect more easing to come  PMIs and exports across Asia suggest external headwinds continue to bite  Food CPI is picking up, but the renewed decline in oil prices implies scant inflationary pressures into 2016 Not all dire Tough month for Chinese equity investors, no doubt. But the latest numbers from the Mainland weren’t too bad. Notably, 2Q GDP surprised on the upside at 7.0% y-o-y. True, it was services (mostly financial) that led the strength, and there could be some payback in the coming month. But still a better result than many had expected. Credit and M2 growth in China also exceeded expectations in June, likely a result of extensive monetary stimulus, and even exports showed a little growth. Moreover, there are incipient signs of a recovery in real estate transactions (up 16% y-o-y last month in terms of floor space). Still, with the equity sell-off giving confidence a knock, downside risks to growth remain. Thus, the Mainland authorities are unlikely to take chances, especially with the threat of disinflation. We expect a further 200bp of RRR cuts and a 25bp rate cut in 3Q15. Korea’s data reversed direction. Unsurprisingly, consumer confidence took a strong hit following the MERS outbreak, similar to last year’s Sewol incident. The government drafted a supplementary budget to help cushion impacted sectors, but we don’t see an immediate recovery in demand. The budget, if passed, will have only a limited impact after accounting for the estimated tax collection drop. After cutting rates in June, the ball is back in the BoK’s court: another cut looks likely in 3Q. Other big news: food prices in India are rising again. Interestingly, this can’t be blamed on the lack of monsoon rains just yet – they have actually been in line with their historical average this season. These spikes are, however, evidence that the economy is still at the mercy of exogenous shocks, and reforms are necessary to counter them. Unless food prices stabilize, more easing by the RBI is unlikely. Macro Asian Economics On top of the data All over the place 17July 2015 Frederic Neumann Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4556 fredericneumann@hsbc.com.hk Joseph Incalcaterra Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4687 joseph.f.incalcaterra@hsbc.com.hk View HSBC Global Research at: http://www.research.hsbc.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it 2 Macro Asian Economics 17July 2015 abc Export silver lining? 3 Best of Asian economics research 4 Asia Brief 5 PMI Heatmaps 6 Indicators 8 GDP & Industrial Production 10 Export 11 Consumer Spending 12 Headline & Core CPI 13 Asia Major Events 15 Australia 16 China 17 Hong Kong 18 India 19 Indonesia 20 Japan 21 Korea 22 Malaysia 23 New Zealand 24 Philippines 25 Singapore 26 Sri Lanka 27 Taiwan 28 Thailand 29 Vietnam 30 Disclosure appendix 31 Disclaimer 32 Contents 3 Macro Asian Economics 17July 2015 abc ...don’t bet on it Let’s look at the data a bit more closely. Exports across the region look decidedly subdued. As we argue in the most recent Asian Economics Quarterly, shipments have slowed despite stabilizing demand in the West. Indeed, the latest export data disappointed in most countries (see our heatmap on page 10), notably in the Asian bellwethers of Korea and Taiwan. There are, however, a few key exceptions, above all in China. June trade data actually show signs of a tentative turn-around. Export growth returned to positive territory – an outcome consiste