FXT Economic Data Summary (Asia-Pacific | 09/15)

Canadian Inflation Holds at 3.0%

Canadas CPI rose 3.0% year on year in August, unchanged from July and in line with expectations. On a non-seasonally adjusted basis, CPI fell 0.1% month on month, below expectations for no change, while seasonally adjusted CPI rose 0.2%. Gasoline inflation slowed from 25.7% to 22.8%, easing headline pressure, but inflation excluding gasoline increased from 2.2% to 2.4%. Travel prices jumped 26.1% year on year, while rent inflation accelerated from 2.5% to 2.8%, pointing to stronger price pressure in housing and some services.

Food and clothing prices were relatively subdued. Grocery inflation eased from 3.1% to 2.8%, dairy inflation slowed from 3.1% to 0.7%, and clothing prices shifted from a 0.9% increase to a 1.1% decline. The Bank of Canadas preferred inflation measures were broadly stable, with median CPI holding at 2.0% and another measure easing from 2.7% to 2.6%. FXT believes overall inflation remains stable, but softer gasoline prices are masking continued pressure in housing and some services, suggesting price conditions have yet to improve broadly.

New Zealand Services Strengthen but Employment Remains Weak

New Zealands Performance of Services Index rose from 50.6 to 51.2 in August, marking a third straight month above 50 and the highest level since September 2023. The three-month average also climbed to 50.9. New orders rose sharply from 52.8 to 55.2, showing the strongest improvement, while activity and sales slipped from 50.4 to 49.4, suggesting stronger orders have yet to fully translate into business activity.

Employment improved from 48.5 to 49.4 but remained in contraction, while inventories fell from 51.7 to 50.8 and supplier deliveries rose from 48.4 to 49.0. Only two of the five main components were above 50. Meanwhile, 60.8% of business comments remained negative, with living costs, interest rates and election uncertainty weighing on confidence. FXT believes the services sector is gradually improving, supported by stronger new orders, but weak activity and employment mean a sustained recovery still requires further confirmation.

US Inflation Expectations Rise Sharply

The University of Michigan Consumer Sentiment Index fell from 51.7 to 47.8 in September, well below the 51.0 forecast and marking a second consecutive monthly decline. Consumer expectations dropped sharply from 51.5 to 45.8, down 11.1% month on month, while current economic conditions eased from 51.9 to 50.9. Overall sentiment was 13.2% lower than a year earlier, as higher fuel prices and trade tensions increased concerns over household finances and the economic outlook.

Meanwhile, one-year inflation expectations jumped from 4.0% to 4.6%, the highest since June, while five-year expectations edged up from 3.3% to 3.4%. Consumers have become more cautious about the economy while concerns over near-term price increases are rising again. FXT believes US consumers face the dual pressure of weaker confidence and higher inflation expectations, with further increases in energy and trade-related costs potentially weighing on spending and real purchasing power.

RBA Keeps the Door Open to Further Rate Hikes

RBA Deputy Governor Andrew Hauser said the central bank remains prepared to raise interest rates further if inflation does not cool as expected. He pointed to Middle East tensions, the global AI investment boom and weak supply capacity in Australia as key inflation drivers. The policy focus has shifted toward whether previous tightening has been sufficient, with the next move dependent on incoming inflation and economic data.

The RBA also aims to support employment and household incomes while avoiding excessive economic damage from tightening too quickly. Softer demand and consumption are consistent with its policy goals, but another rate hike cannot be ruled out while inflation remains elevated. FXT believes inflation control remains the RBAs priority, with further tightening still possible if price pressures fail to ease sustainably.