Which Economic Indicators to Watch Next Week? ... Shift of Interest to Fundamentals

[Asia Economy Reporter Song Hwajeong] As the KOSPI continues to hit record highs day after day, market attention is expected to shift from policy back to fundamentals. Accordingly, focus is likely to be concentrated on major economic indicators to be released next week.

According to Kiwoom Securities on the 26th, numerous economic indicators from major countries will be announced next week. Among them, key indicators to watch include South Korea's June exports and June consumer price inflation rate, the US June ISM Manufacturing Index and June employment report, and China's June Manufacturing PMI.

First, the US June ISM Manufacturing Index is expected by market consensus to decline slightly compared to May. Yumi Kim, a researcher at Kiwoom Securities, said, "This reflects consideration of the possibility that recently increased cost burdens may constrain improvements in the perceived economy. However, considering that the already released Markit Manufacturing PMI rose contrary to expectations of a decline, the focus can be placed more on demand improvement due to normalization of economic activities rather than cost burdens."

The June employment report is expected to continue showing improvement. Nonfarm payrolls are forecasted to increase by 695,000 compared to the previous month, and the unemployment rate is expected to slightly decrease to 5.7%. Since some states have decided to end additional unemployment benefits early, which had recently limited the strength of employment improvement, there is a possibility that employment gains will strengthen especially in low-wage sectors, potentially exceeding expectations. Researcher Kim said, "This could stimulate uncertainty related to the Federal Reserve's tapering (asset purchase reduction), but if more focus is placed on the economic upswing, it will act as a factor supporting risk asset preference in financial markets."

The June China Manufacturing PMI is expected to be around 51.0, showing a slight decline or little change compared to May. While the outlook for China's moderate growth remains valid, the improvement in indicators may slow due to financial market and economic momentum weakening amid partial normalization of the Chinese government's monetary and fiscal policies.

South Korea's June export growth rate is expected to slow compared to May but maintain an increase in the high 30% range. Daily average exports remain favorable, and overall performance is unlikely to be significantly damaged, so expectations for export companies' earnings are expected to be maintained. Researcher Kim said, "Considering that the OECD leading economic indicator remains in an expansion phase, the recovery momentum of the Eurozone economy is strengthening in the second half, and emerging market demand may follow with a time lag due to vaccine distribution, expectations for global demand improvement appear valid."

The June consumer price inflation rate is expected to continue rising until July or August, which may raise concerns about inflation.

Researcher Kim said, "Although uncertainty about monetary policy has increased due to divergent opinions among Fed officials following the June Federal Open Market Committee (FOMC) meeting, next week, through the flow of indicators and Fed officials' remarks, an adjustment process regarding the direction of monetary policy and earnings expectations is expected to follow, so market attention is anticipated to shift back to fundamentals."

This content was produced with the assistance of AI translation services.