The week ahead - export recovery, Monetary policy, US jobs data, China holiday

  • Economy
  • Monday, 28 Sep 2020

Today, the Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin will release August trade data.

Export recovery in sight

TRADE data will take centre stage in an otherwise light economic data week. Today, the Department of Statistics Malaysia (DOSM) will release August trade data.

Economists expect August exports to grow 6.5% year-on-year (y-o-y) while imports are projected to decline 6% y-o-y.

In July, the country’s exports increased by 3.1% to RM92.53bil from a year ago and it was the second highest export value ever registered, after RM97.12bil in October 2018.

Exports grew by 11.7% from June’s RM82.82bil. Imports declined by 8.7% to RM67.38bil from RM73.8bil in July 2019.

Trade surplus expanded by 57.5% to RM25.15bil compared with RM15.97bil in July 2019 and was the highest monthly trade surplus ever recorded.

China Golden Week

China will be on a week-long National Day holiday from Oct 1-8. The country is set to release its September official manufacturing and non-manufacturing PMI on Wednesday.

According to Bloomberg, manufacturing PMI will accelerate to 51.5 from 51.0 in August, while non-manufacturing PMI will ease to 54.9 from 55.2.

China’s Caixin manufacturing PMI will be brought forward to Sept 30 due the week-long Chinese holiday.

According to ING senior Asia economist Prakash Sakpal, China’s PMIs are usually more market-moving than those in the rest of Asia. ING expects a slightly higher manufacturing index but a lower services PMI than August readings, though both indices should stay comfortably in growth territory.

Judging from upbeat August exports and industrial production (up 9.5% y-o-y and 5.6% y-o-y, respectively), profits growth remain strong. If so, firms should continue to expand production, in ING view.

The key event during its Golden Week will be President Xi Jinping’s important policy speech on Oct 1, the 71st anniversary of the founding of China.

Monetary policy

THE central banks of India and the Philippines will meet this week and announce their decisions on Thursday.

IHS Markit expects no changes to the Philippines’ monetary policy despite inflation coming in at the lower end of the target range of 2%-4%. UOB Global Economics and Markets Research concurred that the Bangko Sentral ng Pilipinas (BSP) is expected to keep policy unchanged in October.

It said BSP was likely to continue evaluating the transmission of its existing policy actions to the economy and the fiscal measures to address the pandemic. This alongside ample liquidity in the market justify steady monetary policy ahead.

Meanwhile, ING believes the Reserve Bank of India’s easing cycle has ended. With inflation running well above the 6% policy limit, the central bank has no scope to ease policy any further.

The RBI paused after 115 basis points in rate cuts from March to May. This, together with rampant liquidity measures, has pushed the real interest rate to negative and flooded the system with liquidity.

Yet, bank lending growth remains on a steady downward grind. As such, additional stimulus isn’t going to be of much use for the economy. Confidence has to return first, ING said.

US employment data

ACCORDING to the latest data from the Bureau of Labor Statistics, the US added nearly 1.4 million jobs in August.

But the numbers are still down from July’s 1.7 million and a strong 4.8 million new jobs added in June.

IHS said the current consensus estimates suggest a further 875,000 jobs were added in September, with the jobless rate edging down from 8.4% to 8.3%, but that will be the smallest monthly job gain seen this side of the pandemic and will add further to calls for additional support the recovery

UOB expects another above 850,000 print (from the 870,000 claims reported on Sept 24) while continuing claims could hover higher above last week’s 12.58 million.

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