FXTRADING Economic Data Summary (Asia-Pacific | 08/05)

US Manufacturing Continues to Strengthen

US manufacturing continued to expand in July, with the ISM Manufacturing PMI rising from 53.3 in June to 55.6, its highest level since May 2022 and above market expectations. The data indicates that despite a high interest rate environment and external uncertainties, US business activity remains resilient, with economic growth momentum staying stable.

Looking at the subcomponents, the improvement in manufacturing was mainly driven by stronger production activity. The Production Index increased by 6.3 points to 58.5, reaching its highest level in nearly five years and remaining in expansion territory for the ninth consecutive month. The Employment Index also rose from 49.7 to 52.8, returning to expansion territory for the first time in 33 months, indicating a recovery in corporate hiring demand. Meanwhile, stronger new orders and export demand further strengthened the foundation for manufacturing recovery. FXTRADING analysis believes that the US manufacturing data reinforces expectations for continued economic resilience. The simultaneous improvement in production and employment suggests that business conditions are improving.

Japans Inflation Pressure Remains Limited

Japan‘s Economy Minister Toshimitsu Kiuchi stated that rising energy prices have not yet significantly increased overall consumer price pressures. He noted that Japan’s headline Consumer Price Index (CPI) rose 1.7% year-on-year in June, with current inflation remaining relatively moderate and differing from the inflation risks previously highlighted by the Bank of Japan.

Kiuchi also said that corporate cost pressures may gradually be passed through to food and consumer goods prices in the coming months. However, rising wages and government fuel subsidies are expected to help ease pressure on household consumption. He forecasts that average real wage growth during the current fiscal year will approach 1%, indicating gradual improvement in Japan‘s economic conditions. FXTRADING analysis believes that the Japanese government’s assessment of inflation remains relatively moderate, with policy priorities still focused on supporting stable economic recovery. Although the Bank of Japan has entered a phase of policy normalization, the pace of future rate hikes will continue to depend on wage growth and the sustainability of inflation.

UK Manufacturing Growth Slows

The pace of expansion in the UK manufacturing sector slowed in July, with the final S&P Global Manufacturing PMI falling from 52.5 in June to 51.9, its lowest level in four months. However, the index remained above the 50 threshold for the ninth consecutive month, indicating that the manufacturing sector is still expanding.

According to the detailed data, UK manufacturing output increased for the fourth consecutive month, with production growth reaching its fastest pace in nearly two years. Improvements in new orders and export demand provided the main support. At the same time, supply chain pressures continued to ease, with input cost growth slowing to a five-month low. However, companies remained cautious about hiring, smaller businesses continued to face greater pressure, and market confidence was still affected by trade conditions and policy uncertainty. FXTRADING analysis believes that although UK manufacturing growth has slowed in the short term, production conditions and cost pressures are improving, and the economy has not shown signs of a significant downturn. The strength of the future recovery will depend on the recovery in demand and changes in business investment confidence.

Fed Focuses on Core Inflation

New York Fed President John Williams said that the recent rise in energy prices is unlikely to alter the broader trend of gradually declining US inflation. If the impact of energy prices and tariffs weakens, inflationary pressures could continue to ease as key drivers of price increases fade further.

Williams emphasized that the Federal Reserve‘s focus remains on whether core inflation continues to move back toward its target level, rather than short-term fluctuations caused by supply shocks. He believes that the current interest rate policy remains appropriate, but if the disinflation process stalls, the Fed could still consider tightening policy again. FXTRADING analysis believes that the Fed’s future policy direction will continue to depend on the performance of core inflation. While the US economy remains resilient, energy prices, tariffs, and geopolitical risks could still influence the inflation outlook, leaving room for changes in market expectations regarding monetary policy adjustments.

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