FXT Economic Data Summary (Asia-Pacific | 08/31)

Swiss Manufacturing and External Demand Support Growth

Switzerlands economic outlook improved further in August, with the KOF Economic Barometer rising from a revised 104.2 to 106.7, well above the 103.0 forecast and further above its long-term average of 100. The index has steadily recovered from 95.0 in March, pointing to stronger economic momentum. Manufacturing, other services and foreign demand led the improvement, with gains in intermediate goods inventories, employment prospects, production and order backlogs. Metals and textiles performed particularly well, while private consumption remained weak.

The recovery remains concentrated in the corporate sector and external demand, with household consumption lagging behind. Continued improvement in manufacturing orders and employment could gradually support domestic demand. FXT analysis suggests Switzerland has moved well beyond its early-year weakness, with manufacturing and foreign demand providing stronger growth momentum, although the sustainability of the recovery will depend on whether consumption catches up.

Eurozone Services and Employment Outlook Improve

Eurozone Economic Sentiment Indicator rose from a revised 97.1 to 98.4 in August, beating the 97.5 forecast and moving closer to its long-term average of 100. Employment Expectations increased from 97.4 to 98.9, Services Confidence from 5.1 to 5.8, Industry Confidence from -6.1 to -5.3, Retail Trade Confidence from -6.8 to -5.7, Construction Confidence from -5.2 to -5.0, while Consumer Confidence improved from -15.9 to -15.5, indicating broader gains across sectors.

The EU Economic Sentiment Indicator also rose from 97.2 to 98.2, while Employment Expectations increased from 97.8 to 99.0 and economic uncertainty fell for a fourth consecutive month to 17.2. Confidence improved by 2.3 points in France, 1.3 in Germany and 0.8 in Italy, but declined 2.2 points in Spain, highlighting continued regional divergence. FXT analysis suggests the Eurozone economy is recovering gradually, supported by services and stronger hiring intentions, although overall confidence remains subdued and further data are needed to confirm the recovery.

US Initial Jobless Claims Decline

US initial jobless claims fell from a revised 207,000 to 203,000 in the week ending August 22, below the 209,000 forecast and remaining historically low. Continuing claims also declined from 1.796 million to 1.778 million, suggesting that while hiring has slowed, companies remain reluctant to make significant layoffs and the labor market has yet to show clear signs of deterioration.

Meanwhile, the four-week average of initial claims edged up from 204,250 to 205,500, suggesting the labor market is gradually cooling rather than strengthening again. FXT analysis suggests US employment conditions remain resilient and layoff pressure is contained, reducing the risk of a sharp labor-market downturn and giving the Federal Reserve little immediate reason to accelerate policy adjustments because of employment weakness.

Tokyo Core Inflation Strengthens

Tokyo inflation continued to show underlying price pressure in August. Headline CPI increased from 1.8% to 1.9% year on year, CPI excluding fresh food rose from 1.7% to 1.8%, while the core measure excluding fresh food and energy accelerated from 1.8% to 2.0%. Monthly inflation softened, however, with seasonally adjusted headline CPI growth slowing from 0.4% to 0.2% and CPI excluding fresh food easing from 0.3% to 0.1%.

By category, food prices rose 3.9% year on year, fresh food 5.6%, dining out 5.0%, housing 1.9%, and transportation and communication 2.8%, while fuel, light and water charges fell 1.6%. Weaker energy prices restrained headline inflation, making underlying price pressure more visible. FXT analysis suggests Japan‘s underlying inflation is moving closer to the central bank’s target, supporting further monetary tightening. However, with monthly price momentum slowing, the Bank of Japan is likely to remain cautious and assess wages, consumption and services inflation before taking its next step.

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