FXTRADING Economic Data Summary (Asia-Pacific | 04/14)

New Zealands services sector continues to weaken

New Zealands services sector showed little improvement in March, with overall activity continuing to decline. The BusinessNZ Performance of Services Index fell further from 47.6 to 46.0, remaining firmly in contraction territory and well below its long-term average. This indicates that demand-side weakness has not improved, and amid an uncertain external environment, business pressures are still intensifying.

From a structural perspective, sales, new orders, and employment all declined simultaneously, suggesting that businesses lack confidence in future demand and have begun to scale back operations. Supply chain and inventory indicators also failed to improve, pointing to a broad-based cooling trend. At the same time, business sentiment has deteriorated, with negative feedback increasing noticeably, reflecting weakening market expectations. FXTRADING analysis suggests that New Zealands core issue lies in weak domestic demand combined with external shocks. If this trend continues, the economy may gradually move toward a technical contraction, increasing pressure on policymakers to support growth.

Turkeys consumption momentum begins to cool

Turkeys retail data for February showed a slowdown, marking the first clear sign of easing consumption momentum in recent months. Year-on-year growth declined from nearly 20% to 15.6%. Although still relatively strong, the marginal slowdown indicates that previous consumption support is beginning to fade.

Looking at the breakdown, both food and non-food categories saw slower growth, while the pace of expansion in online consumption also moderated. More notably, month-on-month data turned negative, ending a streak of consecutive gains, which often signals a short-term adjustment phase in consumption. FXTRADING analysis suggests that the slowdown in Turkeys consumption is largely the result of purchasing power erosion under high inflation. If income growth fails to keep pace, consumption may remain under pressure, weighing on the broader economy.

US inflation pressures are gradually easing

US economic data for February showed some divergence. Personal income declined slightly, indicating weakening momentum in income growth, while consumer spending remained resilient, suggesting that demand still holds up. This combination implies that the economy has not significantly cooled, but underlying dynamics are beginning to shift.

On inflation, PCE data came broadly in line with expectations, with core inflation easing slightly to 3.0% year-on-year, indicating a marginal moderation in price pressures. However, on a monthly basis, prices continue to rise steadily, suggesting that inflation has not yet returned to a desirable range and remains relatively elevated. FXTRADING analysis believes that the US is currently in a phase where inflation is gradually easing while demand remains resilient. This mix is likely to keep monetary policy cautious, with a low probability of any sharp near-term shift.

Japan faces dual pressure from imported inflation and growth risks

The Bank of Japan continues to view the current economic environment as broadly stable, with inflation near target and growth above potential, making the overall fundamentals appear manageable. However, this stability largely depends on the assumption that external conditions do not deteriorate further.

As energy price pressures driven by Middle East tensions begin to emerge, risks for Japan are increasing. Rising energy costs not only push up inflation but may also squeeze corporate profits and household consumption, thereby weighing on growth. This combination of rising prices and slowing growth makes policy decisions more complex. FXTRADING analysis suggests that Japans key challenge lies in managing the policy dilemma created by imported inflation. If energy shocks persist, monetary policy space will become more constrained, and market volatility may increase accordingly.