The week ahead

Market attention on IPI figures

THE week will see key industrial production index (IPI) figures released for June as well as manufacturing sales value.

Economists expect improvement in IPI data as activities have started to pick up following the relaxation of Covid-19 movement control.

Globally, IPI performances across major economies are expected to remain sluggish.

The IPI tumbled 22.1% year-on-year (y-o-y) in May compared with the same month of the previous year.

Nonetheless, the IPI surged 18.2% in May as compared with the previous month since the government allowed more industries to resume operations that month.

The output of the manufacturing sector in May contracted 23.2% on a y-o-y basis after recording a 37.2% decline in April.

Meanwhile, Bank Negara will also be releasing its data on international reserves as at July 30 on Friday.

Monetary policy decisions

THE Reserve Bank of Australia (RBA), the Reserve Bank of India (RBI), and the Bank of Thailand (BOT) are due to meet this week for their rate setting meetings.

With their policy rates at all-time low and focus on monetary easing working its way into the real economy, Australia and Thailand’s central bank meetings in all likelihood will pass as non-events, according to ING Asia.

The research house is not expecting either central banks to alter policy next week.

Meanwhile, the RBA’S policy minutes may provide some insights about the future policy course.

UOB Global Economics and Markets Research noted that the RBA has effectively exhausted conventional monetary policy by cutting the official cash rate (OCR) to its self-imposed floor of 0.25%

Hence, UOB does not see further reductions in the policy rate, with negative rates ruled out by RBA governor Lowe.

The research house said rates approaching the zero-mark, policy space is increasingly limited, which may see BOT holding rates this time around.

However, it said policymakers may cut the benchmark rate in September by another 25 basis points to 0.25% to support growth and inflation, failing which unconventional measures may be adopted.

UOB has pencilled in a 25 basis point cut to 3.75% in this meeting, and another 25 basis points in fourth quarter to bring the benchmark rate to 3.5%

GDP report card

INDONESIA and the Philippines will report its gross domestic product (GDP) for the second quarter on Wednesday and Thursday respectively.

ING said there is no prize for guessing that the numbers will be worse than first quartermost likely the worst-ever.

According to IHS Markit estimates, the second quarter GDP for Indonesia and the Philippines are expected to show both economies have fallen into recession at -4.2% and -6.1% respectively.

It added that the Purchasing Manager’s Index (PMI) data showed a moderation in the manufacturing downturn in Indonesia and the Philippines at the end of the second quarter.

Bloomberg estimates Indonesia to report a contraction of 4.5% y-o-y while the Philippines a contraction of 9%.

In the first quarter, Indonesia’s GDP grew 2.97% y-o-y while the Philippines fell 0.2% y-o-y.