- US CPI release for August is likely to show greater signs of tariff-induced inflation.
- ECB to go on pause for the rest of the year.
- China and Taiwan trade data to show moderation of external demand.
Central bank meetings
European Central Bank (ECB) (Sep 11): Goods inflation has stabilised in the past year with Jan-Jul25 average at 1.0% yoy, but service price pressures have proved stickier, averaging 3.5% yoy in the same period on wage growth and higher demand for contact-intensive sectors. Combining these dynamics, aggregate inflation slightly above target at 2.2% yoy in 7M25, and the neutral policy guidance at the recent rate review, there are indications that the ECB’s rate cutting cycle has run its course. We remove our forecast for one more cut this quarter and expect the deposit facility rate to stay at 2% for rest of this year and next. Renewed signs of a sharp slowdown, EUR rally and slower government expenditure are likely pre-conditions for the ECB to return to an easing bias.
Forthcoming data releases
China: Exports are set to accelerate slightly, rising from 7.2%yoy in July to 7.6%yoy in August, as exporters continue frontloading during the extended China–US trade truce. Container ship deadweight tonnage at 20 major Chinese ports increased from an average of 1.42 million tons per day in July to 1.45 million tons per day in August. The new export orders sub-index in the PMI also slightly ticked up alongside the improvement seen in the official manufacturing PMI. Imports are expected to decline by 0.5%yoy in August, after the 4.1%yoy growth in July. Weak job prospects and slowing income growth continue to depress household sentiment. Consumer prices are expected to fall by 0.1%yoy in August, after holding flat in July. Youth unemployment remained high at 17.8% in July, and persistent property market stress adds further pressure, both of which are set to weigh on consumer spending.
Taiwan: August trade data are due this week, with export growth expected to slow to 20–30% y/y, down from the July peak of 42%. The trade front-loading effect ahead of the US reciprocal tariff implementation is likely beginning to fade. As a leading indicator, export orders had already decelerated to 15.2% y/y in July. Elsewhere in the region, South Korea reported 1.3% y/y export growth in August, down from 5.8% in July.
A sharp slowdown in overall exports remains unlikely, however. The delay in the announcement of semiconductor tariffs suggests that front-loading may not have fully subsided. Meanwhile, despite a slowdown in US-bound exports, shipments to ASEAN are expected to remain resilient, helping to cushion the overall export performance.
India: August inflation, due this week, is likely to tick up to 2.1% yoy after the trough at 1.6% yoy month before. Food costs are up on sequential basis, impacted by instances of monsoon surge in few areas of the country. Pulses and cereals, meanwhile, continue to decelerate. Fuel related segments will reflect the yoy rise in non-subsidized LPG, apart from which imported fuel price pressures remain benign. The central bank will weigh the strong GDP print for 1QFY26 against the soft inflation trend, likely leaning towards a pause at the next review. Fiscal support via GST rate rationalization as well as direct tax relief will be demand-accretive in second half of the year. Policy guidance will be important in light of the recent jump in long-term bond yields and widening spreads vs SDLs.
Malaysia: Malaysia’s industrial production (IP) likely remained volatile amid evolving US tariff developments. We foresee IP growth easing to 1.5% YoY in July 2025, down from the surprisingly accelerated 3.0% YoY expansion in June. This likely stemmed from a moderation in manufacturing and electricity momentum, partly due to adverse high base effects, and the diminished impact of front-loaded demand. Mining possibly remained subdued, but less severe than the contraction in May. While the US has lowered reciprocal tariffs on Malaysian imports to 19% starting August (down from 24% threatened on Liberation Day), the still-high US tariffs and associated uncertainty surrounding potential US semiconductor levies present challenges to Malaysia’s externally driven economy in 2H25 (though cushioned by resilient domestic demand).
Economics Team
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