FXTRADING Economic Data Summary (Asia-Pacific | 07/28)

US Durable Goods Orders Return to Growth

US durable goods orders rose 0.3% month-on-month in June, rebounding from May‘s revised 4.0% decline, although the increase fell short of the market expectation of 1.6%. Excluding transportation, orders increased 0.6%, below the expected 0.9%, while orders excluding defense-related items rose 0.3%, indicating that business capital spending remained on an expansionary path. From a broader perspective, durable goods orders have increased in three of the past four months, suggesting that May’s sharp decline was more of a temporary setback than the beginning of a sustained downturn.

US manufacturing is gradually returning to a more stable growth trajectory. Volatility in transportation equipment weighed on the headline figure, but core orders continued to expand, indicating that business investment remains resilient and continues to support the manufacturing outlook. FXTRADING Analysis: Business investment continues to demonstrate resilience, with the technology sector remaining a key driver of growth. As long as core orders continue to expand, US manufacturing is likely to maintain steady momentum in the near term.

German Business Confidence Rises to a Five-Month High

Germany‘s Ifo Business Climate Index rose from 85.7 to 86.6 in July, reaching its highest level in five months and indicating growing optimism among businesses regarding the economic outlook. The improvement was driven primarily by stronger expectations, while companies’ assessment of current business conditions softened slightly. Manufacturing was the main contributor to the recovery, as improving demand and easing supply constraints significantly strengthened business expectations.

Meanwhile, pessimism in the services sector eased, confidence in the trade sector improved for another consecutive month, retailer sentiment strengthened further, and the construction sector saw a moderation in order shortages, suggesting that Germanys economic recovery is gradually spreading across more industries. FXTRADING Analysis: Business confidence in Germany continues to recover, with simultaneous improvements in manufacturing, trade, and construction, suggesting that the economy is gradually stabilizing. Nevertheless, the strength of the recovery will continue to depend on further improvement in demand.

Eurozone PMI Returns to Expansion

The Eurozone Flash Composite PMI rose from 50.0 to 51.9 in July, reaching its highest level in five months and returning to expansion territory for the first time in four months. Manufacturing remained the primary growth driver, with the Manufacturing PMI rising from 51.4 to 52.0, while the Manufacturing Output Index climbed to 53.0, its highest level since March 2022. The services sector also improved, with the Business Activity Index rebounding from 49.4 to 51.6, ending three consecutive months of contraction.

Across individual economies, Germany‘s Composite PMI climbed to 51.2, returning to expansion, while France’s Composite PMI improved to 49.6. Although still below the 50 threshold, the pace of contraction eased noticeably. Economic activity across the rest of the Eurozone expanded at the fastest pace in eight months, indicating that the regions recovery is becoming increasingly broad-based. FXTRADING Analysis: Simultaneous improvements in manufacturing and services, together with strengthening business confidence and employment, indicate that the Eurozone economy has started the third quarter on a much stronger footing than the second, with the overall recovery gaining momentum.

Japans Core Inflation Edges Higher

Japans core CPI rose 1.6% year-on-year in June, in line with market expectations and up from 1.5% in May. Headline CPI also accelerated from 1.5% to 1.7%. However, the core-core CPI, which better reflects underlying inflation, eased from 1.8% to 1.7%, suggesting that underlying inflationary pressure remains limited. Food prices continued to be the primary driver of inflation, with food prices excluding fresh food rising 3.1% year-on-year.

Energy prices declined just 0.1% year-on-year, a much smaller decrease than in May, while healthcare and durable goods prices continued to provide additional support to inflation. However, the impact of higher global oil prices and the weaker yen has yet to be fully passed through to consumer prices, leaving overall inflation at a relatively moderate level in the near term. FXTRADING Analysis: Japans inflation continues to be driven primarily by food prices, while underlying inflation remains subdued. The Bank of Japan is therefore likely to maintain its current policy stance in the near term while monitoring how rising energy costs may affect future inflation.

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