- Our updated calendar identifies the top events that should be on your radar this week.
- We also provide an outlook overview region by region for the rest of the year.
Our view in a nutshell
- Despite relatively stable domestic demand, growth will remain muted as drags from real exports continue.
- We expect core CPI inflation to remain around 0.5% y-o-y for a while as it turns into deceleration in 2019.
- We expect the current YCC policy to remain untouched in the longer run, with a series of adjustments enhancing sustainability.
- The risk is renewed yen appreciation caused by our concerns over a global recession and US protectionism.
- The export-led economic downturn is spilling over into capex. We do not expect a recovery until Q4 at the earliest.
- In H2, we expect more central bank rate cuts in China, Korea, India, Indonesia, Malaysia, the Philippines and Australia.
- India and parts of Southeast Asia are the region’s new stars in terms of rising long-run potential growth.
- China: We expect policy easing to sustain given strong growth headwinds and re-escalating US/China trade tensions.
- Korea: We expect the BOK to deliver a 25bp rate cut in Q3 2019 (most likely July) and another in Q4 (most likely November).
- India: We expect the cumulative effects of monetary policy easing to support a cyclical recovery starting Q3 2019.
- Indonesia: President Jokowi’s re-election bodes well for further reforms, investment spending and potential growth.
- Australia: We see better, but still-sub trend growth, continuing low inflation and two more 25bp rate cuts (Q4, Q1).
- Elevated trade tensions and other factors will likely slow growth over 2019-20 before a modest recovery in 2021.
- Recession risk is elevated, but strong consumer fundamentals will help to sustain the expansion.
- Core inflation should pick up as higher tariffs pass-through to consumer prices and labour markets remain tight.
- After cutting rates in July, we expect another 25bp rate cut from the Fed in October.
- Fed balance sheet runoff ended in August and we expect expansion starting in Q4 2019.
- Notable risks include aggressive trade policy, unresolved fiscal issues and further deterioration in financial conditions.
- We have revised down our GDP growth forecast. The recession in euro area manufacturing risks spilling over into services.
- We see euro area core inflation rising gradually due to capacity pressures, but remaining well below the ECB inflation aim
- ECB President Draghi’s Sintra speech was a game-changer and we now expect a package of easing measures in September
- We have raised the tail risks of both a no Brexit and no deal, though continue to base our forecasts on a free trade agreement.
- We see the run rate of UK growth returning to around its trend rate in 2020.
- BoE rules of thumb suggest rate hikes of around 75bp are needed to tackle a 0.3% inflation overshoot on the forecast horizon.
- We see the BoE raising rates once a year from May 2020, which is a later and more gradual tightening than previously expected.
For more information read The Economy Next Week: Slowing China and rate cuts Asia
Chief US Economist
Chief UK Economist
Chief China Economist
Chief Economist Japan
Head of Global Macro Research and Co-head of Global Markets Research
Chief Economist India and Asia ex Japan