FXT Economic Data Summary (Asia-Pacific | 09/17)

Japans Energy Import Costs Drive Trade Pressure

Japans trade deficit widened to ¥1.106 trillion in August, up from ¥294.1 billion a year earlier and above expectations of around ¥1.053 trillion. Exports rose 19.3% year on year, slowing from 23.2% in July but beating the 18.2% forecast. Imports increased 28.0%, also exceeding the 26.3% estimate. Overall, exports remained solid, while the wider deficit mainly reflected imports growing much faster than exports.

Higher prices were a key driver of import growth. Export and import volumes rose 2.5% and 2.7%, respectively, while export unit values increased 16.4% and import unit values jumped 24.7%. Mineral fuel imports rose 38.4%, with petroleum imports surging 58.7% despite volumes increasing only 3.6%. Meanwhile, exports of semiconductors, semiconductor manufacturing equipment and automobiles grew 52.3%, 40.1% and 16.5%, respectively, indicating resilient external demand. FXT believes the wider trade deficit mainly reflects higher energy import costs rather than weakening overseas demand, while energy prices could continue feeding into domestic inflation.

Australias Leading Indicator Shows Signs of Recovery

Australias economic outlook improved modestly. The six-month annualized growth rate of the Westpac-Melbourne Institute Leading Index recovered from -0.17% to -0.09% in August, moving closer to trend. Resilient household demand and stronger data center investment provided support. Westpac also raised its forecast for year-on-year economic growth at the end of 2026 from 1.0% to 1.5%, suggesting the economy is gradually stabilizing.

However, several leading components remained weak. Over the past six months, the labor market, financial markets, commodity prices and consumer confidence collectively reduced the index by 0.42 percentage points, while dwelling approvals contributed 0.32 points and US industrial production added 0.08 points. Higher fuel prices, expectations of further rate hikes and housing weakness could continue weighing on consumption. FXT believes Australias economic resilience is improving, but the growth foundation remains fragile and inflation pressures have yet to ease materially, giving the RBA reason to maintain a hawkish stance in the near term.

UK Inflation Returns Above 3%

UK CPI inflation rose to 3.1% year on year in August from 2.9% in July, matching expectations, while prices increased 0.5% month on month. CPIH inflation, which includes owner occupiers housing costs, also accelerated from 3.1% to 3.3%. The increase was mainly driven by transport costs, with transport inflation rising from 3.6% to 4.6%, fuel inflation climbing from 15.5% to 23.0%, and goods inflation increasing from 2.2% to 2.7%.

Underlying inflation remained relatively stable. Core CPI held at 2.6%, below expectations of 2.7%, while services inflation stayed at 3.4% and food inflation remained at 1.3%. Housing and household services inflation rose from 4.6% to 4.9% under CPI and from 4.1% to 4.3% under CPIH. FXT believes the rise in headline inflation was mainly driven by energy and housing costs, while core and services inflation have yet to show significant acceleration. The Bank of England will therefore continue watching whether energy-related pressures spread more broadly.

Eurozone Industrial Production Shows Better Underlying Performance

Eurozone industrial production fell 0.1% month on month in July, slightly better than expectations for a 0.2% decline, while June was revised down from flat to a 0.1% contraction. Output therefore declined for a second consecutive month. On an annual basis, production was unchanged from a year earlier, improving from Junes revised 0.3% decline. Across the EU, industrial production fell 0.3% month on month but rose 0.3% year on year.

Sector performance was relatively encouraging. Non-durable consumer goods output fell 1.6%, providing the main drag, while energy and durable consumer goods production both rose 0.9%. Capital goods increased 0.5% and intermediate goods gained 0.3%. Performance varied considerably across member states, highlighting an uneven industrial recovery. FXT believes underlying conditions in Eurozone industry are showing some improvement, but two consecutive monthly declines suggest the recovery remains fragile and is closer to stabilizing at low levels than entering a clear expansion.