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- US: Mild inflation data continues to support Fed rate cut expectations; GDP growth and retail sales surprise on the upside
- China: Broad-based slowdown in economic activities; fixed asset investment, loan growth, and consumer sentiment remain subdued
- Singapore: Growth pick up supported by labour productivity gains with the MTI expecting resilient growth for rest of the year; we anticipate softer core inflation in 2H24
- Indonesia: Steady 2Q GDP growth at 5.05% y/y led by domestic drivers; expect slight moderation in 2H with sentiment surveys softening
US: Further progress on inflation. CPI readings were in line with consensus (0.2% m/m for both headline and core CPI). More importantly, July’s data represents the third consecutive month that readings were mild – from an inflation perspective, the Fed should be lowering rates imminently. However, the pace and extent would probably be dictated by the state of the labour market and the state of the US consumer.
Recent US data flow is not exactly alarming, but there are several corners of incipient weakness. The labour market (unemployment has risen to 4.3%; it was 3.7% at the beginning of the year), retail sales (less than 2% y/y growth through 1H24), and PMI data are now softening without much ambiguity. The plethora of such data was compounded by the latest nonfarm payroll data a fortnight ago, contributing to a shakeup in markets.
It is crucial to maintain perspective – while markets are showing growing concern that a cyclical slowdown could be around the corner, particularly for the world’s largest economy, we do not see the makings of a hard landing. 2Q US GDP surprised on the upside – rising unemployment rate is largely a function of an expansion of the labour force, with many Americans returning to the workforce. Additionally, US retail sales accelerated in July at record speed since early 2023, in a broad advance that signals a resilient consumer, even in the face of high prices and borrowing costs.
Looking at Asia’s data, July has the makings of a good month with South Korea and Vietnam’s exports up comfortably in double-digit terms y/y. We are therefore not joining the herd in pricing in 75, or even 100, bps in rate cuts. In our view, 50 bps would be adequate.
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