FXT Economic Data Summary (Asia-Pacific | 08/24)

Eurozone Economic Expansion Edges Higher

The Eurozone Composite Output PMI rose from 52.0 to 52.1 in August, reaching a nine-month high. The improvement was more pronounced in manufacturing, with the Manufacturing PMI climbing from 51.9 to 52.8 and the Manufacturing Output PMI rising from 52.9 to 53.4, while the Services PMI remained unchanged at 51.7. S&P Global estimates that the latest survey readings are broadly consistent with quarterly GDP growth of 0.3% in the third quarter, indicating that the Eurozone economy continues to expand at a moderate pace.

Germanys Manufacturing PMI increased from 52.2 to 54.1, while the Manufacturing Output PMI rose from 54.7 to 56.7, reaching a 55-month high. However, the Services PMI fell to 48.5. France remained relatively weak, with its Composite PMI declining to 48.8. FXT believes that the recovery in manufacturing and improvement in employment have strengthened the resilience of the Eurozone economy. As long as growth does not slow significantly, the European Central Bank still has room to maintain a cautious but relatively hawkish policy stance.

UK Consumption Remains Relatively Resilient

UK retail sales volumes fell 0.5% month-on-month in July, in line with market expectations. June‘s increase was revised down from 1.0% to 0.7%, while May’s gain was revised up to 1.3%. Year-on-year growth slowed from 3.8% to 1.6%, below the 2.2% forecast. However, retail sales volumes in the three months to July were still 1.1% higher than in the previous three-month period, suggesting that the monthly decline has not yet changed the broader consumption trend.

Weakness was concentrated mainly in the non-food sector, where sales volumes fell 1.3%, with clothing, household goods and department stores performing poorly. Earlier promotional activity had brought some demand forward, while hot weather also reduced customer traffic, weighing on July sales. Food consumption provided some support, and overall retail sales volumes remain at relatively high levels compared with those seen since April 2022. FXT believes that the July decline largely reflects an adjustment following earlier strong growth. UK household consumption has not deteriorated significantly, although future momentum will continue to depend on changes in real incomes and prices.

Japans Manufacturing Sector Continues to Lead Economic Growth

Japan‘s Composite Output PMI rose from 52.7 to 53.4 in August, marking the fastest pace of expansion since February. The Services PMI increased from 51.2 to 52.3, while the Manufacturing PMI climbed from 54.5 to 55.1. The Manufacturing Output Index remained elevated at 56.1. The simultaneous expansion of manufacturing and services indicates that the breadth of Japan’s economic growth is widening.

Manufacturers reported strong increases in output and new orders, while growth in total sales and overseas demand reached some of the strongest levels in eight and a half years. Semiconductor and artificial intelligence-related demand continued to provide support. Companies increased hiring and business confidence improved, but energy prices, supply-chain disruptions and a weaker yen kept cost pressures elevated, while selling prices also rose at a relatively strong pace. FXT believes that Japans economic momentum is strengthening, particularly in manufacturing and external demand. Persistent price pressures also mean that the Bank of Japan still has reason to maintain a relatively tight policy stance in the near term.

Australian Labor Market Continues to Cool

Australian employment fell by 15.8K in July, significantly weaker than market expectations for an increase of 11.4K, while Junes gain was revised to 80.2K. The unemployment rate rose from 4.4% to 4.5%, the participation rate declined from 67.0% to 66.9%, and the employment-to-population ratio slipped from 64.0% to 63.9%. The simultaneous deterioration across several indicators suggests that signs of cooling in the labor market are becoming more evident.

Hours worked fell 0.6% month-on-month, declining from 2.01 billion hours to 1.998 billion hours. Male employment decreased by 11K and female employment fell by 5K. Within female employment, full-time positions increased by 17K, while part-time positions declined by 22K. The underemployment rate remained unchanged at 6.4%. FXT believes that the cooling labor market provides further evidence that the high-interest-rate environment is weighing on economic activity. The urgency for the Reserve Bank of Australia to tighten policy further has diminished, although persistent inflationary pressures will continue to limit the scope for an early shift toward monetary easing.