Japan Flash PMIs (Aug. 2021)

Today’s flash PMIs suggest that the worsening Delta outbreak may yet result in a fall in consumption this quarter. And with supply shortages intensifying, the manufacturing sector isn’t stepping into the breach.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Economics Weekly

Omicron restrictions wouldn’t jolt BoJ into action

Even if Omicron proves more transmissible than Delta, its impact on Japan’s economy could vary substantially depending on how deadly it is, how well it evades vaccines, and PM Kishida’s appetite for draconian containment measures. With supply shortages already severe, fresh restrictions on Japanese manufacturers’ global supply chains coupled with a global shift in spending away from services and back towards goods could cause input price pressures to intensify further. However, we doubt any resulting boost to core goods inflation would do much more than simply offset a drag from energy inflation. As such, core inflation would stay well short of the BoJ’s 2.0% target, keeping rate hikes off the table.

3 December 2021

Japan Data Response

Labour Market & Industrial Production (Oct. 2021)

Employment fell sharply again in October despite the lifting of states of emergency declarations at the start of the month. However, it should rebound sharply across November and December in line with the revival in face-to-face service sector activity. And while industrial production only edged up in October, we think it too will rebound more strongly this month and next, potentially approaching its recent April peak in December.

30 November 2021

Japan Data Response

Japan Retail Sales (Oct. 2021)

Retail sales kept rising in October despite another drop in motor vehicles sales. With supply disruptions now starting to ease and mobility picking up, they should continue to increase.

29 November 2021

More from Marcel Thieliant

Australia & New Zealand Data Response

Australia Wage Price Index (Q2)

The subdued 0.4% q/q rise in the wage price index in Q2 underlines that the tight labour market didn’t generate large cost pressures even before the latest virus restrictions.

18 August 2021

Japan Data Response

Japan External Trade (Jul. 2021)

Japan’s export volumes stagnated in July but given that a large share of those exports are cars and capital goods, we think they will rise again over the coming months.

18 August 2021

Australia & New Zealand Economics Update

RBA may be too pessimistic about price pressures

The Reserve Bank of Australia signalled today that it’s unlikely to reverse the tapering of its bond purchases even as Sydney’s virus outbreak is getting worse. We still expect the tight labour market to deliver stronger wage growth and inflation than the Bank is anticipating, prompting the Bank to tighten earlier than its current guidance of 2024.

6 August 2021
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