FXT Economic Data Summary (Asia-Pacific | 09/03)

RBNZ Delivers Another Rate Hike

The Reserve Bank of New Zealand raised the Official Cash Rate by another 25 basis points to 2.75% on Wednesday. Q2 CPI inflation rose to 4.1% y/y, mainly due to higher fuel costs driven by the Middle East conflict. Excluding vehicle fuel, however, inflation eased to 2.9%, with most core measures within the 1%–3% target range. The RBNZ expects CPI to remain at 3.9% in Q3 and Q4, before falling to 3.7% in March 2027, 2.6% in June and around 2.1% by year-end.

Further tightening remains possible, with the OCR projected at 2.8% in December, 3.0% in March 2027, 3.1% by mid-year and 3.2% by year-end. Meanwhile, economic momentum remains weak, with Q2 GDP expected to be flat before growing 0.5% in both Q3 and Q4, while unemployment could stay around 5.5% by year-end. FXT analysis suggests New Zealands tightening cycle is not yet over, but weak growth and easing core inflation point to a gradual pace of future hikes.

US ADP Employment Growth Continues to Slow

US private-sector employment increased by 38,000 in August, below the 48,000 forecast and Julys revised 46,000 gain, marking the weakest increase since January. Goods-producing industries lost 10,000 jobs, including 17,000 in manufacturing. Services added 48,000 positions, led by 45,000 in education and healthcare and 16,000 in leisure and hospitality. Professional and business services lost 16,000 jobs, while trade, transportation and utilities shed 5,000.

By company size, large firms added 34,000 jobs, small businesses gained just 3,000, while mid-sized firms recorded no net growth. Wage growth also slowed, with median base pay rising 3.2% y/y and total income increasing 4.7%. Base pay rose 3.0% for job stayers and 4.7% for job changers. FXT analysis suggests the US labor market is gradually losing momentum, with hiring increasingly concentrated in a few industries and large companies, potentially weakening overall labor-market resilience.

Australia Q2 GDP Slightly Beats Expectations

Australias economy grew 0.4% q/q in Q2, slightly above the 0.3% forecast, while annual growth slowed from 2.5% to 2.1%. Domestic final demand contributed 0.3 percentage points, including 0.2 points from household consumption and 0.1 points from public demand. Household spending rose 0.4%, with discretionary consumption up 1.4%, largely driven by vehicle purchases, while essential spending fell 0.3% and private investment was flat. Net trade added 0.1 percentage points, its first positive contribution since Q4 2023.

Cost pressures remain a concern. The domestic final demand deflator rose 0.8% q/q, up from 0.5%, while employee compensation increased 1.5% and real unit labor costs rose 0.9%. Hourly labor productivity was flat on the quarter and fell 0.2% y/y, while the terms of trade declined 1.6%. FXT analysis suggests Australia continues to grow moderately, but uneven consumption, rising costs and weak productivity will keep the RBA cautious about inflation risks.

Eurozone Inflation Rebounds

Eurozone headline CPI rose 3.3% y/y in August, above the 3.2% forecast, while prices increased 0.4% m/m. The rebound was largely driven by energy inflation, which accelerated from 10.3% to 14.3%. Meanwhile, core CPI eased from 2.5% to 2.4%, below the 2.5% forecast, indicating that underlying price pressures continue to cool gradually.

Other components also showed a mixed picture. Services inflation slowed from 3.3% to 3.0%, food, alcohol and tobacco inflation held at 1.2%, while non-energy industrial goods inflation increased from 0.9% to 1.2%. Overall, higher energy costs are lifting headline inflation without yet triggering a broad-based acceleration. FXT analysis suggests the ECB must watch for spillovers from energy costs, while easing core and services inflation gives policymakers some room to remain patient.