China reports December money and loan data this week, but no date has been set. CPI and PPI will be reported Thursday and are expected to ease to 2.1% y/y and 1.6% y/y, respectively. Last week, official manufacturing PMI fell to 49.4 in December from 50.0 in November. This was the first sub-50 reading since July 2016 and the lowest since February 2016. Caixin data confirmed this as its manufacturing PMI fell to 49.7, the first sub-50 reading since May 2017.
Taiwan reports December trade Monday. Exports are expected to contract -5.5% y/y and imports by -0.3% y/y. Korea has already reported weaker than expected trade data for the month and so Taiwan is seen following suit. Taiwan then reports December CPI Tuesday, which is expected to remain steady at 0.3% y/y. Low price pressures should allow the central bank to remain on hold this year due to downside growth risks.
Hungary reports November retail sales Monday. It then reports November IP Tuesday. Central bank minutes and trade data will be released Wednesday. Data are likely to follow Poland’s lead and soften compared to October. Growing downside risks to the region suggest the central bank will be in no hurry to normalize policy this year.
Bank of Israel meets Monday and is expected to keep rates steady at 0.25%. This will be the first meeting led by new Governor Yaron. The central bank delivered the first rate hike back in November by a 4-1 vote. As such, even if Yaron is dovish, he will likely be outvoted. That said, we suspect the central bank will take a very cautious approach in this current environment.
Korea reports November current account data Tuesday.The trade surplus narrowed in December, as exports contracted -1.2% y/y and imports rose 1% y/y. CPI inflation eased to 1.3% y/y rather than the expected 1.7% and down sharply from 2% in November. The BOK just hiked rates last month, but the data support our view that it is unlikely to hike again for quite some time doe to downside growth risks.
Czech Republic reports November construction and industrial output Tuesday. November trade will be reported Wednesday. December CPI will be reported Thursday and is expected to rise 2.1% y/y vs. 2.0% in November. Lastly, November retail sales will be reported Friday and are expected to rise 1.8% y/y vs. 3.1% in October.
Chile reports December CPI Tuesday, which is expected to rise 2.6% y/y vs. 2.8% in November. The central bank delivered the first rate hike back in October but signaled a modest pace of tightening. Next policy meeting is January 30, no change is expected then.
Brazil reports November IP Tuesday, which is expected at -0.1% y/y vs. +1.1% in October. December IPCA consumer inflation will be reported Friday, which is expected to rise 3.72% y/y vs. 4.05% in November. If so, this would be the lowest since May. Due to low price pressures, markets have pushed out expectations for the first rate hike from COPOM until Q3 2019. Next policy meeting is February 6, no change is expected then.
National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%. CPI rose only 1.1% y/y in December, the lowest since December 2016 and further below the 1.5-3.5% target range. The bank has pledged steady rates through 2019 but could extend it at this meeting if price pressures remain low.
Mexico reports December CPI Wednesday, which is expected to rise 4.85% y/y vs. 4.72% in November.Inflation continues to climb above the 2-4% target range, but a stable peso may allow the central bank to keep rates steady at the next policy meeting February 7. November IP will be reported Friday and is expected to rise 0.1% y/y vs. 1.0% in October.
Peru central bank meets Thursday and is expected to keep rates steady at 2.75%. CPI rose 2.2% y/y in December, above the 2% target but well within the 1-3% target range. Bloomberg consensus sees the first rate hike coming in Q1. However, due to downside global growth risks, we suspect the bank will keep rates steady in H1.
Malaysia reports November IP and manufacturing sales Friday. The economy remains resilient. However, low price pressures should allow Bank Negara to keep rates on hold for much of this year. Next policy meeting is January 24, no change is expected then.
