August 1, 2014

Philippines Ready to Act for Inflation Goal, Tetangco Says

• The Philippine central bank will take further policy action if there are risks to its inflation target
• It raised its benchmark interest rate for the first time since May 2011, and said the price-gains target for next year could be at risk
• Inflation expectations remain elevated even as liquidity growth is seen to continue to moderate
• Money supply rose 23% in June from a year ago, the slowest pace in a year, while net bank lending eased from a month earlier

So, Philippine government already has increased its reserve requirement twice this year, and yet it couldn't control the inflation rate. It hardly looks like Philippines government will control the inflation rate unless it can get enough food supply from other countries. Even it does so, Philippines government will pay lots of extra money to buy the foods, and it will eventually harm the economic growth.

South Korea exports jump, but cloudy outlook seen prompting rate cut

• S. Korea Trade Balance ▲$2.5 billion MoM; ▲5.5 billion in May
• A combination of still-tepid global demand and weak domestic consumption are causes
• A rate cut may help the economy to boost domestic consumption as well as business sentiment
• Crucially, South Korea’s manufacturers are not selling enough to their biggest export market China. Export to China ▼7.0% in July YoY
• However, sales to U.S. ▲19.4% and to EU ▲11.5%

The Korean government is about to spend $40 billion stimulus, and seem like decreasing interest rate by 25bp. The market index is increasing with that expectation. What I'm afraid is those stimulus would help the domestic spending, but the Korean economy is highly depended on exports. Slow growth in China (so as other countries) and appreciated Korean Won are the issues the Korean government needs to solve as well.

China Manufacturing Gauge Rises to Two-Year High

• China’s manufacturing expanded in July at the fastest pace in more than two years
• PMI was at 51.7 MoM; It was 51.0 in June
• Signaling a pickup in economic growth is strengthening amid government support policies
• Government Stimulus
• Tax cuts for small companies, speeding up public investment and fiscal spending
• The central bank cut reserve requirements for some banks and turned to unconventional tools such as relending to boost credit
• “The economy is clearly improving, driven mostly by government infrastructure investment”

Sources:

http://www.bloomberg.com/news/2014-08-01/china-s-manufacturing-gauge-rises-to-two-year-high.html

http://www.reuters.com/article/2014/08/01/southkorea-economy-idUSL4N0Q627P20140801

http://www.bloomberg.com/news/2014-08-01/philippines-ready-to-act-for-inflation-goal-tetangco-says-1-.html