China’s GDP growth slows down to 7.6% y-y in 2q12, compared to the 8.1% y-y gain in 1q11. Though the y-y reading is slower, on a q-q basis, the nation’s GDP advanced by 1.8% q-q, compared to the 1.6% q-q pace in 1q12, which somehow relieves our concern that the economy would get worse. The government has conduct two benchmark rate cuts in June and July, by 25 bp and 31 bp respectively, and going forward we would expect more actions by government to bolster the economy, especially in such a sensitive period of government power transition.
In Singapore, economic growth contracted 1.1% q-q saar (adv est) in 2Q12, reversing from the 9.4% expansion in the preceding quarter. The negative growth momentum was largely due to weaker performance by the manufacturing sector (on a sequential basis) -owing to a decline in biomedical manufacturing output. Amid a global slowdown -particularly in US, EU and China, we do not rule out the possibility of a technical recession for Singapore (an externally-oriented economy) in 3Q12. Should growth come in weaker-than-expected in the months ahead, MAS might
shift its focus from inflation to growth concerns and tone down its hawkish stance -reverting from a slightly steeper slope (Apr 12 MPS) to a more gradual appreciation of the S$NEER policy band at the next policy review in Oct 2012. Other data release from Singapore showed retail sales continuing to contract in May (-2.7% m-m sa) compared to a mild decline of 0.9% in the preceding month. Excluding motor vehicles, retail sales registered a sharper deceleration (-3.3%), reversing from growth of 0.8% in the preceding month.
South Korea’s export price fell by 1.6% m-m, a second consecutive monthly drop, after May’s 0.3% m-m drop. Import price fell by 3.6% m-m in June, extending the 1.9% drop in May. On y-y basis, export price rose by 2.2% y-y in June, slower than the 3.2% y-y pace in May. Import price fell by 1.2% from a year ago, compared to the 2.1% y-y gain in May. As reported earlier, the central bank unexpectedly cut the benchmark rate to by 25 bp to 3.0%, for the first time in over 3 years, to safeguard the downside risk from Europe crisis and China’s slowdown.
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