FXTRADING Economic Data Summary (Asia-Pacific | 08/13)

U.S. Inflation Continues to Cool in July

U.S. inflation continued to ease in July, with headline CPI rising 0.1% month-on-month while the annual rate slowed from 3.5% to 3.4%. Core CPI increased 0.2% month-on-month, with the annual rate declining from 2.6% to 2.5%. All four readings were in line with market expectations. By category, shelter and food prices both rose 0.1%, with shelter accounting for roughly two-thirds of the overall monthly increase. Energy prices fell 1.5% month-on-month but remained 14.7% higher year-on-year.

Core inflation has now fallen to 2.5% from its recent peak of 2.9% in May, indicating that price pressures are gradually easing, although inflation remains above the Federal Reserves 2% target. Meanwhile, recent weakness in employment data has raised the threshold for further rate hikes, while the current inflation level is not yet low enough to support a rapid shift toward monetary easing. FXTRADING believes the Federal Reserve is likely to keep interest rates unchanged in the near term, with policy attention shifting toward August employment and inflation data, while closely monitoring whether higher oil prices begin to feed through into broader price pressures.

Canadian Building Permits Rebound Strongly

The total value of Canadian building permits surged 18.5% month-on-month to C$14.9 billion in June, reversing a 1.7% decline in May and far exceeding market expectations for a 0.8% increase, while reaching the highest level in more than two years. Non-residential building permits rose by C$1.8 billion to C$6.8 billion, with institutional projects increasing by C$1.5 billion to C$3.2 billion. Industrial and commercial building permits rose by C$268.8 million and C$67.9 million, respectively, becoming important contributors to the monthly increase.

Residential construction intentions also improved, rising 6.3% month-on-month to C$8.1 billion. Multi-unit residential projects increased by C$283.7 million to C$5.3 billion, while single-family home permits rose by C$196 million to C$2.8 billion.FXTRADING believes the simultaneous recovery in residential and non-residential projects indicates renewed momentum in Canadian construction investment. If construction activity continues to improve, it could provide additional support for economic growth.

Indias Inflation Rises to a 20-Month High

India‘s headline inflation rate rose from 4.38% to 4.45% in July, reaching its highest level since December 2024 and broadly matching market expectations of 4.5%, while CPI increased 0.88% month-on-month. Energy prices have risen since the outbreak of the Middle East conflict, while depreciation pressure on the rupee has also pushed up import costs. Nevertheless, inflation remains within the Reserve Bank of India’s tolerance band of two percentage points on either side of its 4% target, suggesting that overall price pressures remain under control.

By category, food and beverage prices rose 5.52% year-on-year, while transport prices increased 4.43%, making them the main sources of inflationary pressure, with higher energy costs and unfavorable weather affecting some agricultural products.FXTRADING believes the renewed rise in inflation will limit the Reserve Bank of Indias room for further monetary easing, with the future policy direction increasingly dependent on whether energy and food prices begin to cool again.

German Energy Costs Rise Rapidly

German energy prices rose 8.3% year-on-year in July, becoming the main driver of higher inflation. Following the expiration of temporary fuel tax relief at the end of June, motor fuel prices surged 23% year-on-year, while heating oil prices increased 34.7%. However, lower electricity, natural gas, and district heating prices meant that overall household energy costs still declined 1.4% year-on-year. Food inflation remained at 0.4%, while core inflation stood at 2.4%, indicating that underlying price pressures remained relatively stable.

Goods prices increased 2.5% year-on-year, while services inflation eased slightly to 2.9% and rents rose 1.8%. CPI increased 0.8% month-on-month in July, mainly driven by summer travel and energy prices. Package holidays rose 12.6%, international airfares increased 7.1%, and gasoline and heating oil prices climbed 11.2% and 6.4%, respectively, while clothing prices fell 5.4%. FXTRADING believes Germanys latest rise in inflation has been driven primarily by energy policy adjustments and seasonal factors, while underlying price pressures have not deteriorated significantly. However, a sustained increase in energy costs could still make the European Central Bank more cautious about further monetary easing.

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