FXTRADING Economic Data Summary (Asia-Pacific | 07/23)

UK Inflation Continues to Ease

UK inflation continued to moderate in June, with the Consumer Price Index (CPI) slowing to 2.6% year-on-year from 2.8% in May, below the market expectation of 2.7%. Monthly CPI rose 0.1%, easing from the previous 0.2% increase and matching market forecasts. From a structural perspective, goods inflation slowed from 2.0% to 1.7%, while services inflation also eased from 3.7% to 3.6%, indicating that overall price pressures are gradually moderating and the disinflation trend remains intact.

However, underlying inflation remains relatively resilient. Core CPI, which excludes energy, food, alcohol, and tobacco, held steady at 2.6%, above the market expectation of 2.5%, suggesting that domestic price pressures have yet to fully subside. Although headline inflation continues to improve, the slower decline in core inflation indicates that the Bank of England is unlikely to relax its policy stance in the near term. FXTRADING believes that continued moderation in headline inflation is helping improve market expectations for the UK economy, but persistently elevated core inflation means the Bank of England will likely wait for further evidence of easing price pressures and remain cautious in adjusting monetary policy.

South African Consumer Recovery Remains Moderate

South Africa's retail sales increased 2.3% year-on-year in May, accelerating from the revised 1.2% growth recorded in April. Sales of textiles, clothing, footwear, and leather goods rebounded from a 1.0% decline in the previous month to a 3.7% increase, while pharmaceutical, medical, and cosmetic retail sales accelerated from 0.6% to 2.1%. General dealers maintained a 1.0% growth rate, reflecting a gradual improvement in household consumption.

However, the recovery in consumer spending remains uneven. Sales growth of furniture, household appliances, and home furnishings slowed from 8.6% to 8.1%, while sales at food, beverage, and tobacco specialty stores declined 0.4%. Retail sales of hardware, paint, and glass products also fell 0.4%.FXTRADING believes that South Africa's consumer market continues to recover, but the foundation for growth remains fragile. Performance across sectors remains mixed, and further improvements in domestic demand will depend on stronger employment, income growth, and financing conditions.

Turkish Manufacturing Confidence Declines

Türkiye's manufacturing confidence index fell from 103.5 to 102.2 in July, marking its lowest level in nearly three months. Businesses became more cautious about current operating conditions, with the index for orders over the past three months dropping from 106.6 to 99.9, current orders declining from 88.4 to 84.5, fixed investment spending expectations falling from 112.4 to 104.7, and the overall business outlook edging down from 90.9 to 90.2.

Nevertheless, manufacturers remain relatively optimistic about future production. The future output index rose from 117.6 to 119.3, export order expectations increased from 112.5 to 116.6, employment expectations improved from 103.9 to 105.2, and the finished goods inventory index also climbed from 95.8 to 97.0, suggesting that external demand and production plans continue to support the manufacturing sector. FXTRADING believes that the recent decline in manufacturing sentiment mainly reflects weaker current orders rather than a significant deterioration in overall fundamentals. As export demand and production expectations remain positive, they are expected to continue providing support for Türkiye's manufacturing sector.

The Federal Reserve Keeps the Door Open for Further Tightening

Federal Reserve Vice Chair Philip Jefferson stated that the current monetary policy stance continues to support the labor market while helping inflation gradually return to the 2% target, making policy adjustments unnecessary at this stage. However, he also emphasized that if inflation fails to continue easing, the Federal Reserve will reassess its policy stance, and the possibility of further rate hikes has not been ruled out.

He noted that tariff policies, geopolitical tensions, and rising energy prices could continue to push inflation higher, while artificial intelligence, although expected to improve productivity over the long term, may also stimulate investment and consumer demand in the short term, thereby adding to price pressures. FXTRADING believes that Jefferson's remarks indicate the Federal Reserve continues to prioritize inflation control. As long as price pressures do not ease significantly, policymakers are likely to maintain a cautious stance, and the option of further rate hikes will remain part of market expectations.